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    Stock Price Based on Dividends, Growth Rate and Required Rate of Return

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    The Ramirez Company's last dividend was $1.75. Its dividend growth rate is expected to be constant at 25% for 2 years, after which dividends are expected to grow at a rate of 6% forever. its required return is 12%. What is the best estimate of the current stock price?

    a. $41.58
    b. $42.64
    c. $43.71
    d. $44.80
    e. $45.92

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    Solution Summary

    This solution calculates the stock price of a company based on its dividends, growth rate and required rate of return.