Explore BrainMass

# The current price of the stock

Not what you're looking for? Search our solutions OR ask your own Custom question.

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

Avery industries jsut paid a dividend of \$2.00 per share (i.e.,D0=\$2.00). analysts expect the company's dividend to grow 25% for the next 2 yrs and 15% for the following 3 years. After 5 years the dividend is expected to grow at a constant rate of 5%. the required rate of return on the company's stock is 12%. what should be the current price of the company's stock? what should the stock be selling for at the end of year 3?

https://brainmass.com/economics/finance/the-current-price-of-the-stock-28747

#### Solution Preview

The current price of the stock is the present value of all the future dividend payoffs from the stock.

Avery industries just paid a dividend of \$2.00 per share (i.e.,D0=\$2.00). The dividend is expected to grow 25% for the next 2 yrs
So payoff at the end of first year and second year is 2.00*(1+0.25) and ...

#### Solution Summary

The current price of the stock is emphasized.

\$2.49