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Dyer Furniture is expected to pay a dividend of D1 = $1.65 per share at the end of the year, and that dividend is expected to grow at a constant rate of 6.8% per year in the future. The company's beta is 1.19, the market risk premium is 5.55%, and the risk-free rate is 4.00%. What is Dyer's current stock price?
(Round your answer to 2 decimal places.)
The Gordon Growth Model or dividend discount model is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value. In other words, it is used to value stocks based on the net present value of the future dividends.
The formula to calculate:
P0 is the current stock price 1, D1 is the dividend after year 1, Re is required rate of return, g is growth rate.
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