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The Pineapple Company's last dividend was $1.75. Its dividend growth rate is expected to be constant at 25% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return is 12%. What is the best estimate of the current stock price

Respuesta :

The best estimate of the current stock price is $48.31.

What is dividend?

Dividend refers to the profit earned after reducing all the expenses and the cost. The dividend is the money distributed to the stakeholders by the company.

According to the above case, The pineapple Company earned the dividend of $1.75 and growth rate is constant at the rate of 25% for 2 years.

The best price estimate of the current stock =                                                                        =[$1.75(1.25)2(1.06)]/(0.12-0.06)

= $48.31.

The best estimate of the current stock price is  $48.31.

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