ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Problem 10 Gordon Growth Model
You purchase a stock that is going to pay a constant dividend for the next two years, and then then dividends
are expected to grow at 2% rate for each year thereafter. Risk-free rate is 2%, and the risk premia investors
require on the stock is 1%. Given that the price of the stock is $30, find the next year's dividend payment.
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Transcribed Image Text:Problem 10 Gordon Growth Model You purchase a stock that is going to pay a constant dividend for the next two years, and then then dividends are expected to grow at 2% rate for each year thereafter. Risk-free rate is 2%, and the risk premia investors require on the stock is 1%. Given that the price of the stock is $30, find the next year's dividend payment.
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