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In practice, a common way to value a share of stock when acompany pays dividends is to va

In practice, a common way to value a share of stock when acompany pays dividends is to va

In practice, a common way to value a share of stock when acompany pays dividends is to value the dividends over the next fiveyears or so, then find the “terminal” stock price using a benchmarkPE ratio. Suppose a company just paid a dividend of $1.85. Thedividends are expected to grow at 10 percent over the next fiveyears. In five years, the estimated payout ratio is 45 percent andthe benchmark PE ratio is 35.

 

What is the target stock price in five years?

Abhinav 03-Dec-2019

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