# What is the expected stock price of Pablo's Pizza one year from now?

Pablo's Pizza International Inc.'s common stock currently sells for $20 per share. The stock

has just paid an annual dividend of $1.00 (D0 = $1.00). The dividend is expected to grow at a constant rate of 10% per year. (Pr. 10-3)

a. Calculate the stock price expected 1 year from now.

b. Calculate the required rate of return on PPI's common stock.

SHOW ALL WORK.

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#### Solution Preview

a. Calculate the stock price expected 1 year from now.

D1=D0*(1+g)=1*(1+0.1)=$1.10

Or you can calculate it by a TI BA II Plus:

N=1, ...

#### Solution Summary

This solution shows step-by-step calculations for stock price as well as the steps for solving this using the mentioned financial calculator.

$2.49