Holyrood Co. just paid a dividend of $2.10 per share. The company will increase

Question

Holyrood Co. just paid a dividend of $2.10 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on Holyrood stock is 11 percent, what will a share of stock sell for today? (Do not round intermediate calculations and round your final answer to 2 decimal places; e.g., 32.16)

Explanation / Answer

Answer:

P3 = $2.10(1.20)(1.15)(1.10)(1.05) / (.11

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