I need a little bit of help with this problem.
Stag Corp. will pay dividends of $4.75, $5.25, $5.75, and $7 for the next four years. Thereafter, the company expects its growth to be at a constant rate of 7 percent. If the required rate of return is 15 percent, what is the current price of the stock?
For the most part I understand the nonconstant growth formula and how to calculate when dividends are constant but I am completely confused with this problem. Thank you.
After trying this formula and receiving an answer that was not listed I spoke with my professor about it and found out that the actual formula that I should have been using was relatively simple. The formula was: 4.75(1.15)+5.25(1.15)^2+5.75(1.15)^3+7(1.15)^4+(7( 1.07)/((.15-.07) ))/(1.15)^4 =69.41