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9. In practice, another way to value stock is to value the dividends over time...

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9. In practice, another way to value stock is to value the dividends over time and then find a "terminal" stock price using a benchmark PE ratio. AC/DC Electric co. just paid a $2. 10/share annual dividend which stmed to grow at 12 over the next three years. In year-5, the estimated payout ratio is 60s and the benchmark P/E is 25. (7 pts) a. What is the target stock price in three years ? (4 pts) b. What is today's stock price assuming a 10% capital cost? (3 pts)

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