The Starr Co. just paid a dividend of $1.60 per share on its stock. The dividend

Question

The Starr Co. just paid a dividend of $1.60 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. Investors require a return of 10 percent on the sto

What is the current price?

What will the price be in three years?(stock Price)

The Starr Co. just paid a dividend of $1.60 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. Investors require a return of 10 percent on the sto

Explanation / Answer

P0 = D1/Ke-g D1 1.60*(1.06) 1.696 Ke 10% g 6% P0 42.4 1.696/(0.1-0.06) P3 = D4/Ke-g D4 1.60*(1.06)^4 2.019963136 P3 50.5 2.02/(0.1-0.06) P12 = D13/(Ke-g) D13 1.60*(1.06)^13 3.412685216 P12 85.325 3.413/(0.1-0.06)

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