Reddick enterprises' stock is expected to pay a dividend of $0.8575 at the end of the year. the dividend is projected to increase at a constant rate of 5.50% per year. the required rate of return on the stock, rs, is 9.00%. what is the stocks expected price in 3 years from today?

$30.35

Explanation:

We know,

Stock price, =

Given,

= $0.8575

Constant Growth Rate, g = 5.50% = 0.055

Required rate of return on the stock = 9% = 0.09

As we do not know the value of , we have to find it through =

x (1 + g)

Putting the value in the stock price formula for third year

=

=

=

= $30.35

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