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

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    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

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