Pharmecology is about to pay a dividend of $1.65 per share. It’s a mature company, but future EPS and dividends are expected to grow with inflation, which is forecasted at 4.25% per year. The nominal cost of capital is 11.00%.
a. What is Pharmecology’s current stock price?
b. What would be Pharmecology’s current stock price using forecasted real dividends and a real discount rate?