ColgatePalmolive Company has just paid an annual dividend of

?Colgate-Palmolive Company has just paid an annual dividend of

$ 1.27

Analysts are predicting dividends to grow by

$ 0.17

per year over the next five years. After? then, Colgate\'s earnings are expected to grow

6.9%

per? year, and its dividend payout rate will remain constant. If? Colgate\'s equity cost of capital is

7.8%

per? year, what price does the? dividend-discount model predict Colgate stock should sell for? today?

The price per share is

? (Round to two decimal? places.)

Recent Dividend, D0 = $1.27

D1 = $1.27 + $0.17 = $1.44
D2 = $1.44 + $0.17 = $1.61
D3 = $1.61 + $0.17 = $1.78
D4 = $1.78 + $0.17 = $1.95
D5 = $1.95 + $0.17 = $2.12

Constant growth rate, g = 6.9%
Cost of Capital, ke = 7.8%

D6 = $2.12 * 1.069 = $2.2663

P5 = D6 / (ke - g)
P5 = $2.2663 / (0.078 - 0.069)
P5 = $251.811

P0 = $1.44/1.078 + $1.61/1.078^2 + $1.78/1.078^3 + $1.95/1.078^4 + $2.12/1.078^5 + $251.811/1.078^5
P0 = $180.02

So, price per share is $180.02