Common way to value share of stock

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Reference no: EM132003440

In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.34. The dividends are expected to grow at 19 percent over the next five years. The company has a payout ratio of 45 percent and a benchmark PE of 22. The required return is 13 percent. What is the target stock price in five years? What is the stock price today?

Reference no: EM132003440

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