Answer to Question #123677 in Financial Math for majd moussa

Question

Womack Toy Company’s stock is currently trading at $25 per share. The stock’s dividend is projected to increase at a constant rate of 7 percent per year. The required rate of return on the stock, Rs, is 10 percent. What is the expected price of the stock 4 years from today?

Answer 1

The rate of growth is 7%

therefore the expected price after 4 years,

$25*1.07^4= 32.77$

Therefore the expected price is 32.77 after four years.