A stock is expected to pay a dividend of $3 next year. The dividend will grow at a rate of 5% for 2 years, and will then grow at a rate of 2% from that point on. If the required rate of return is 6%, what is the stock’s value today?

The pric eof the stock today us $77.12

Explanation:

The two stage dividend growth model of DDM will be used to calculate the price of the stock today. The formula for two stage growth model is:

Price today = D1 / (1+r) + D2 / (1+r)^2 + ... + [(Dn / r - g) / (1+r)^n]

Price today = 3 / (1+0.06) + + 3 * (1+0.05) / (1+0.06)^2 + [(3 * (1+0.05) * (1+0.02) / 0.06 - 0.02)  /  (1+0.06)^2]

Price today = $77.12

start by isolating the variable on one side by adding 43w^2 to both sides.   the equation will read:

25w^2+5=0

*subtract 5 from both sides*

25w^2=-5

*divide both sides by 25*

w^2=-1/5

*take the square root of both sides*

w=√(-1/5)

the square root of -1 is i.   the square root of 5 remains √5

the answer is i/√5.

hope this

1. avoid them

2. a talk with them

3. ask someone you trust

4. ignore

5. call police