Colgate-Palmolive Company has just paid an annual dividend of $0.96. Analysts are predicting an 11.0% per year growth rate in earnings over the next five years. After that, Colgate's earnings are expected to grow at the current industry average of 5.2% per year. If Colgate's equity cost of capital is 8.5% per year and its dividend payout ratio remains constant, for what price does the DDM predict Colgate stock should sell?

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter7: Corporate Valuation And Stock Valuation
Section: Chapter Questions
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Colgate-Palmolive Company has just paid an annual dividend
of $0.96. Analysts are predicting an 11.0% per year growth
rate in earnings over the next five years. After that, Colgate's
earnings are expected to grow at the current industry average
of 5.2% per year. If Colgate's equity cost of capital is 8.5% per
year and its dividend payout ratio remains constant, for what
price does the DDM predict Colgate stock should sell?
The value of Colgate's stock is $
cent.)
(Round to the nearest
Transcribed Image Text:Colgate-Palmolive Company has just paid an annual dividend of $0.96. Analysts are predicting an 11.0% per year growth rate in earnings over the next five years. After that, Colgate's earnings are expected to grow at the current industry average of 5.2% per year. If Colgate's equity cost of capital is 8.5% per year and its dividend payout ratio remains constant, for what price does the DDM predict Colgate stock should sell? The value of Colgate's stock is $ cent.) (Round to the nearest
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