Bob Katz is interested in the following stock: – current div…
Bob Katz is interested in the following stock: – current dividend is $3.00 – projected three year growth rate of 11% – growth rate after year 3 is expected to fall and remain constant at 6% – Bob’s required return is 12% Step 1: Present value of Dividends t Do FVIF Dt PVIF PVdiv 1 2 3 Step 2: Future value of stock price Step 3: Present value of future stock price Step 4: Present value of stock Solving for step 4, what would Bob Katz be willing to pay (approximately) for the stock?