Company XYZ expects their earnings and dividends

| June 12, 2016

Question
Company XYZ expects their earnings and dividends per share to grow 5% each year indefinitely. If the following year’s dividend is $10 with a market cap rate of 8%, what’s the current stock price?

Company XYZ’s growth will end after year 3. Year 4 and after, they will pay out all earnings as dividends. What’s the stock price now? Assumption
Is next year’s EPS is $20.

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