A share of stock has a dividend that is expected to grow at a constant perpetual rate.
During the next year (t=0 to t=1), the dividend yield is expected to be 7.76%.
The capital gains yield for the next year is expected to be 13.72%.
Dividends are paid at year’s end.
If the dividend to be paid at the end of the year (at t=1) is expected to be $7.05, what is a fair price for the stock today (t=0)?
(Answer to the nearest $0.01)