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In practice, a common way to value a share of stock when a company pays dividends is to value the dividend over the next five to seven years and then find the terminal stock price using a benchmark

In practice, a common way to value a share of stock when a company pays dividends is to value the dividend over the next five to seven years and then find the terminal stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.25. The dividends are expected to grow at 11 percent over the next five years. In five years, the estimated payout ratio is expected to be 60 perccht and the benchmark PE ratio is expected to be 16. The required return for the company's stock is 14 percent. What is the target stock price in five years? Enter your answer as dollars with 2 digits to the right of the decimal point in the box shown below.

Apr 12 2021 View more View Less

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