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The Dividend Discount Model (DDM)

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IGT, Inc. just paid a dividend of 1.75 per share. Analysts believe dividends will grow 16% per year for the next 5 years, and at 1% after that. How do I calculate the value of a share if the required return on the company's shares is 12%?

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Solution Summary

The solution computes price of share using DDM.

$2.19
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If this year's year-end dividend is $8 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM?

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