CCS Inc. currently pays no dividends, but intends to pay a $12.00 per share dividend three years from today. However, CCSI expects earnings and dividends to decrease 5% annually thereafter. If the required rate of return for stocks with similar risk is 10%, what is the current value of a share CCSI stock? Please provide details on how answer was achieved.
the answer my professor gave is $66.12
which he achieved by using this formula: D3/r-g = 12/ 0.10+0.05= 80
then: 80/1.1^2 = 66.12
where or what formula does he derive 1.1^2?