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I am at a loss at to how to calculate the stock price. Please help.

The growth rate for McDonalds is expected to be 10% for one year. After that, the dividend rate is expected to grow at a rate of 6% indefinitely. McDonald's shareholders require a rate of return on equity equal to 11%. The last dividend the company paid was $2.20. How do I calculate the current price of the stock?

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Solution Summary

This provides the steps to calculate the stock price

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Po=Div1/(ke-g)
ke=cost of equity=11%
Div1= Expected dividend ...

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