Compute the value of a share of common stock of Lexi's Cookie Company whose most recent dividend was $2.50 and is expected to grow at 3 percent per year for the next 5 years,
after which the dividend growth rate will increase to 6 percent per year indefinitely. Assume 10 percent required rate of return.
D6 = 2.90 (1 + 0.06 ) = $3.07
P2 = × = $47.69
Value of stock = $47.66 + $10.32 = $57.99
Business
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