Dividend for Bush Inc $2.53 last year. It is expected to grow at 9%, 6%, 12%, 4% over the next four years respectively. Expect the stock to trade at $57 on January 1 year 5. Risk free rate is 2%, beta is 1.4 and market risk is 1.4.
What is the required rate of return?
Based upon dividend discount model, what is the current price of the stock?
Now instead of trading at 57 on January 1 year 5, you assume that dividend will grow at 11% after year 4.
- What would you expect the stock price to be On January 1 year 5
- Today?