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Using The Dividend Discount Model

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Kudrow stock just paid a dividend of $4.76 per share and plans to pay a dividend of $5 per share next year, which is expected to increase by 3 percent per year subsequently. The required rate of return is 15 percent. The value of Kudrow stock, according to the dividend discount model, is $?

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Solution Summary

This solution illustrates how to determine the price of a share of common stock using the Dividend Discount Model.

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According to the Dividend Growth Model, the price of a stock is computed as P=D(1)/(r-g), where D(1) is the next dividend, r is ...

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