Analyze the following stock as a possible investment. It's most recent dividend was $1.95. Selena believes that the dividend will grow at the rate of 3.25% annually for the next 3 years. She is planning a huge wedding in three years and intends to sell the stock at that time. Her opportunity cost of capital is 4.5%. Be sure to show all the steps in your calculations in case Selena has any questions.
Find the expected dividends
Find the value of the stock in three years, when Selena intends to sell the stock
Find the price of the stock today, Po, using the free cash flow valuation model
Explain how to use the free cash flow valuation model. For this portion you should put your comments in a textbox.
Please show all work for solutions