Question

The dividend for PQR Inc., is currently $1.65 per share. It is expected to grow at...

  1. The dividend for PQR Inc., is currently $1.65 per share. It is expected to grow at 20 percent next year and then decline linearly to a 5 percent perpetual rate beginning in 4 years. If you require a 10.19 percent return on the stock, what is the most (in $) you would pay per share?

Please use these formulas: https://www.chegg.com/homework-help/fundamentals-of-investments-7th-edition-chapter-6-problem-16qp-solution-9780077641788

I want to double check my work to see if it's correct.

Thanks.

Math   Statistics-And-Probability   
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Answer #1

Answer:

The price of the stock is the present value of its future dividends.

Price = $73.59

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