Jockey Co. has a cost of equity capital estimated to be 15%. They have a current dividend of $3 per share and analysts expect the dividend to grow at a rate of 25% a year for the next 3 years, and then it will grow at a constant rate of 10% per year. What is the current stock price of Jockey Co.?
This is an application of the two-stage dividend growth model, in which dividends are assumed to grow at a given rate for a certain number of year and, after that, grow at another (usually lower) rate. In order to find the value of the stock, we have to ...
An application of the two-stage dividend growth model is featured.