Problem:
The Border Crossing just paid an annual dividend of $4.20 per share and is expected to pay annual dividends of $4.40 in year 1 and $4.50 in year two. After that, the firm expects to maintain a constant dividend grow rate of 2 percent per year 1 and $4.50 in year two. After that, the firm expects to maintain a constant dividend growth rate of 2 percent per year.
Required:
Question: What is the value of this stock today if the required return sis 14 percent?
- $30.04
- $32.18
- $33.33
- $35.80
- 36.74
Note: Provide support for rationale.