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In practice, a common way to value a shate of stock when a company pays...

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Finance

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In practice, a common way to value a shate of stock when a company pays dividends is to value the dividends over the next five years or so, then find the "terminal" stock ptice using a benchmark PE ratio. Suppose a company just paid a dividend of $1.21. The dividends are expected to grow at 16 percent over the next five years. In five years, the estimated payout ratio will be 40 percent and a benchmark PE will be 23 . The required retum is 12 percent a. What is the target stock price in five years? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the stock price today? Note: Do not round intermediate calculations and round your onswer to 2 decimal places, e.9., 32.16

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