Based upon the Gordon Growth Model, calculate the anticipated market price of a stock that is paying dividends at a constant growth rate of 6.25%, with a recent dividend of $1.00, and a required return rate of 15%. (Show all work/calculations/formulas.)
You would like to consider purchasing a stock that is selling for $90 and pays $2.33 a year in dividends. It is predicted that the stock is going to sell for $114 one year from now, and you would like to earn 15% on the investment. Should you purchase the stock today- based upon the One-Period Valuation Model? And, what should the market price be today? (Show all work/calculations/formulas)© BrainMass Inc. brainmass.com September 23, 2018, 1:56 pm ad1c9bdddf - https://brainmass.com/business/discounted-cash-flows-model/gordon-growth-model-and-one-period-valuation-model-510838
This solution illustrates how to value an investment using the Gordon Dividend Growth Model and the One-Period Valuation Model.