POG, Inc. is expected to pay a dividend of $1 in one year. If the dividend growth rate is 2 percent forever and the required return is 10 percent, what should the stock be sold for five years from now?

Question

BlackTom AI · Accepted Answer

The question asks for the stock price five years from now given a dividend that grows at a constant rate.
First, identify the key inputs: D1 = $1, growth rate g = 2% = 0.02, required return r = 10% = 0.10.
With perpetual constant growth, the price at time t (P_t) is given by P_t = D_{t+1} / (r - g).
We need P_5, so we must find D_6, the dividend in year 6 (one year after year 5).
D_6 = D1 * (1 + g)^{5} = 1 * (1.02)^{5} ≈ 1.10408.
Then P_5 = D_6 / (r - g) = 1.10408 / (0.10 - 0.02) = 1.10408 / 0.08 ≈ 13.800999...,
which rounds to approximately $13.80.
Note on the missing options: the provided data does not include any answer choices to analyze, so there is no option-specific reasoning to evaluate. If options were present, each would be assessed for consistency with the dividend growth model and the implied assumptions (constant growth, correct use of D_{t+1}, and correct discounting with r - g).

BUSI_V 370 922 2025SS Quiz 4 Equities

POG, Inc. is expected to pay a dividend of $1 in one year. If the dividend growth rate is 2 percent forever and the required return is 10 percent, what should the stock be sold for five years from now?

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BUSI_V 370 922 2025SS Quiz 4 Equities

POG, Inc. is expected to pay a dividend of $1 in one year. If the dividend growth rate is 2 percent forever and the required return is 10 percent, what should the stock be sold for five years from now?

查看解析

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类似问题

ABC, Inc. just paid a dividend of​ $2. ABC expects dividends to grow at​ 10% annually forever. The return on shares like​ ABC, Inc. is typically around​ 12%. What is the most you would pay for ABC’s share?

ALP’s most recent dividend was​ $2.00 per share and is selling today for​ $70. The dividend is expected to grow at ​ 7% per year for the foreseeable future. Should you purchase the share if the market return is​ 10% on investments with comparable​ risk?

Using a dividend discount model, find the intrinsic value (price at time zero) for a firm whose expected dividend is $1.92 and growth in dividends for year 2, 3, and 4 is 23.2% and constant growth afterwards is 0.54%. The cost of equity is 9.21%. (Answer in 2 decimal places, 6.21 for $6.21).

Using a dividend discount model, find the intrinsic value (price at time zero) for a firm whose expected dividend is $1.37 and growth in dividends for year 2, 3, and 4 is 13.8% and constant growth afterwards is 1.42%. The cost of equity is 6.67%.

AWSM has just paid a dividend of $1.24 and is expected to increase the future dividends at a rate of 3% per year indefinitely. If you, as a shareholder, require 12% per year, what is the current price per share?

更多留学生实用工具

希望你的学习变得更简单

ABC, Inc. just paid a dividend of $2. ABC expects dividends to grow at 10% annually forever. The return on shares like ABC, Inc. is typically around 12%. What is the most you would pay for ABC’s share?

ALP’s most recent dividend was $2.00 per share and is selling today for $70. The dividend is expected to grow at 7% per year for the foreseeable future. Should you purchase the share if the market return is 10% on investments with comparable risk?