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Caan corporation will pay a $2.70 per share dividend next year. the company pledges to increase its dividend by 5.5 percent per year indefinitely. if you require a return of 12 percent on your investment,
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Caan corporation will pay a $2.70 per share dividend next year. the company pledges to increase its dividend by 5.5 percent per year indefinitely. if you require a return of 12 percent on your investment, how much will you pay for the company’s stock today?

User Maggie Ying
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Use the constant growth model, we find the price of the stock today is:
P0 = D1 / (R − g) = $2.70 / (0.12 − 0.055) = $41.54
User ELTA
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