Answer:
The price of the stock today is $68.85
Step-by-step explanation:
The stock's dividends are expected to grow at a constant rate indefinitely. Such a stock qualifies under the constant growth model of the DDM and the price for such a stock today is calculated using the following formula,
P0 = D0 * (1+g) / r - g
Where,
- D0 * (1+g) is D1 that is dividend expected for the next period
- r is the required rate of return
- g is the growth rate in dividends
P0 = 1.79 * (1+0.077) / (0.105 - 0.077)
P0 = $68.85