A stock just paid an annual dividend of $6.1. The dividend is expected to grow by 3% per year for the next 4 years. In 4 years, the P/E ratio is expected to be 14 and the payout ratio to be 60%. The required rate of return is 8%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 16P
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A stock just paid an annual dividend of $6.1. The dividend is expected to grow by 3% per year for the next 4 years. In 4 years, the P/E ratio is expected to be 14 and the payout ratio to be 60%.

The required rate of return is 8%.


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