Firm X is expected to pay its first annual dividend 5 years from now. That payment will be $3.10 a share. Starting in year 6, the company will increase the dividend by 2 percent per year. The required return is 15 percent. What is the value of this stock today?
The value of the stock is the present value of all dividends. The dividend in year 5 D5 = 3.10 ...
The solution computes the present value of a stock based on dividend payments.