Answer:
P0 = $26.5925 rounded off to $26.59
Explanation:
Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,
P0 = D0 * (1+g) / (r - g)
Where,
D0 is the dividend paid recently
D0 * (1+g) is dividend expected for the next period /year
g is the growth rate
r is the required rate of return or cost of equity
P0 = 2.69 * (1+0.038) / (0.143 - 0.038)
P0 = $26.5925 rounded off to $26.59
