1.5 pts D Question 6 Use the following information to answer the question number

Question

1.5 pts D Question 6 Use the following information to answer the question number 6 &7. Pepsi shares trade on the New York Stock Exchange under the ticker symbol PEP. Pepsi was paying a dividend of $2.76 until this year. Suppose that Pepsi grows its dividend payment at 12.84 percent for next five years and then at 4.86 percent forever thereafter. Assume that the cost of equity is 16 percent. What value would you place on Pepsi's stock at the end of 5th year using Gordon's constant growth dividend discount model? $86.51 364,51 72.51 $47.53

Explanation / Answer

price of Pepsi at the end of 5th year = 2.75*1.1284^5*1.0486/(0.16 - 0.0486)

price of Pepsi at the end of 5th year = 47.53

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