In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the nex

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In Practice A Common Way To Value A Share Of Stock When A Company Pays Dividends Is To Value The Dividends Over The Nex 1 (15.4 KiB) Viewed 84 times

In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the "terminal" stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.27. The dividends are expected to grow at 12 percent over the next five years. The company has a payout ratio of 30 percent and a benchmark PE of 22. The required return is 14 percent. a.What is the target stock price in five years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the stock price today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Target price in five years b. Stock price today