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# Current and Expected Price of Stock

You are buying XYZ stock. It just paid a dividend of \$2.13 on April 21st 2007 and is expected to pay decreasing dividends for the next seven years on April 21st until 2014. The rate of the decrease is 3%. After that, the dividend will grow at a constant rate of 5% forever (on each April 21st, starting in 2015, you start to receive increasing dividends). The required rate of return is 13%.

What is the current price of the stock??
What is the expected price of the stock on April 21st, 2014??

#### Solution Preview

3) You are buying XYZ stock. It just paid a dividend of \$2.13 on April 21st 2007 and is expected to pay decreasing dividends for the next seven years on April 21st until 2014. The rate of the decrease is 3%. After that, the dividend will grow at a constant rate of 5% forever (on each April 21st, starting in 2015, you ...

#### Solution Summary

The solution explains how to calculate the current and expected price of stock

\$2.19