A stock currently pays a dividend of 2 and is expected to gr

A stock currently pays a dividend of $2 and is expected to grow dividends at 3.5% forever. If the required return is 11%, what is the value of the stock? 2a. Waht will be the value of the stock in 3 years?

Solution

what is the value of the stock

=(D0*(1+g))/(r-g)

=(2*(1+3.5%))/(11%-3.5%)

=27.60

what will be the value of the stock in 3 years

=27.60*(1+3.5%)^3

=30.60

The above should be the answer..