Question

Fletcher Company's current stock price is $36.000, its last dividend was $2.40, and its required rate of return is 12%. If divends are expected to grow at a constant rate, g, in the future and if Rs is expected to remain at 12%, what is Fletcher's expected stock price 5 years from now?

Answer 1

First find g,
g= rs-(D1/P) = 5.33%
After 5 years
P = (D1(1+g)^5)/(rs-g) = $ 46.37

Answer 2

5.33%

Answer 3

Yes, that is correct.