Problem:
A stock is trading at $40 per share. The stock is expected to have a year-end dividend of $6 per share (D1 = $6), and it is expected to grow at some constant rate g throughout time. The stock's required rate of return is 16% (assume the market is in equilibrium with the required return equal to the expected return).
Required:
Question: What is your forecast of g? Explain in detail.