How would I solve this?
Company A has projected net income per share for this year at $2.00 per share. It has traditionally paid out a dividend of 30% of its net income. Income and dividends have been growing at a rate of 5% per year. The equity discount rate for comparable companies is 10%.
What is the projected dividend for next year?
What is the current value of the stock using the Constant Growth Model of the Dividend Discount Model?