Assume today is Jan. 1st, 2022, you observe that ADA Company’s stock price is $40. Analysts
forecast that ADA’s next dividend, to be paid at year end of 2022, will be $1.00. You also find
the following historic annual return of the company ADA for the last 4 years.
2018 2019 2020 2021
PTU’s Returns -12% +14% -10% +40%
If PTU’s future dividend growth rate, g, is constant. What must be the value of this
growth rate g if stock price today is $40, next dividend is $1, and the arithmetic (simple)
average return you calculate in a) is cost of equity, Re