Assume that you are using the dividend discount model the, Finance Basics

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Assume that you are using the dividend discount model the

Question: Assume that you are using the dividend discount model (the Gordon model) to value stock. The stock currently pays no dividends, but expectedto begin paying dividends $3.00 per share in four years. Suppose the stock is expected to grow at a rate of 15% for the next five years that it started paying dividends, then slows to a long-term growth rate of 5%, how much is that stock worth today?

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Finance Basics: Assume that you are using the dividend discount model the

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