Question

Zeta corporation just paid a $2.00 dividend. analysts believe that zeta corporation's dividend will grow by 20% next year, and then settle into a constant growth regime at 5% per year into the future. if investors assign a required rate of return of 12% to zeta's stock, what should the stock sell for today?

Answer 1

I guess the correct answer is $32.14

Zeta Corporation just paid a $2.00 dividend. Analysts believe that Zeta Corporation’s dividend will grow by 20% next year, and then settle into a constant growth regime at 5% per year into the future. If investors assign a required rate of return of 12% to Zeta’s stock, the stock sell for today is $32.14.