A Stock Price Prediction with Dividend Discount Model
What is the expected price of a stock in one year if it is currently priced at $58.37 and expected to pay a dividend of $1.32 with a return of 9.62%?
The expected price of the stock in one year is approximately $59.82.
Calculation Using Dividend Discount Model
The expected price of a stock in one year can be calculated using the Dividend Discount Model (DDM) formula. The formula is:
Expected Price = Current Price + Dividend * (1 + Return)
Given:
Current Price = $58.37
Dividend = $1.32
Return = 9.62% or 0.0962
Plugging in the values, we get:
Expected Price = $58.37 + $1.32 * (1 + 0.0962)
Expected Price = $58.37 + $1.32 * 1.0962
Expected Price = $58.37 + $1.448944
Expected Price = $59.82
Therefore, based on the given data, the expected price of the stock in one year is approximately $59.82.