Explore BrainMass

Explore BrainMass

    Stock valuation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The current price of ADM's stock, Po, is $20 and the company is expected to pay a $2.20 dividend next year. If the appropriate required rate of return for ADM's stock is 15 percent, what should be the price of the stock in one year, P-hat sub 1? Assume that the company has achieved constant growth.

    © BrainMass Inc. brainmass.com June 3, 2020, 8:01 pm ad1c9bdddf

    Solution Preview

    Using the dividend discount model, we first find the constant growth rate.

    Po = ...

    Solution Summary

    The solution explains how to calculate the price of a stock using the dividend discount model.