The Starr Co. just paid a dividend of $1.65 per share on its stock. The dividend

Question

The Starr Co. just paid a dividend of $1.65 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year, indefinitely. Investors require a return of 12 percent on the stock. What is the current price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current price What will the price be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) What will the price be in 14 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 3216) Stock price

Explanation / Answer

current price of the stock = 1.65*1.05/0.07 = 24.75

price in 3 years = 24.75*1.053 = 28.65

price in 14 years = 24.75*1.0514 = 49.00

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