Answer:
The stock price is 38.63
Explanation:
We use the gordon model to calculate the horizon value and with htat the value of the stock:
[tex]\frac{D_1}{r-g} = PV\\\frac{D_0(1+g)}{r-g} = PV\\[/tex]
D1 = 2.60 x 1.04 = 2.704
rate of return 11% = 0.11
grow rate = 4% = 0.04
[tex]\frac{2.704}{0.11-0.04} = PV\\[/tex]
P0 = 38.62857143
The taxes should be ignored as the gordon model do not include them in the calculations
