Thirsty Cactus Corp. just paid a dividend of $1.55 per share. The dividends are expected to grow at 25 percent for the next 8 years and then level off to a 8 percent growth rate indefinitely. Required : If the required return is 14 percent, what is the price of the stock today

P0 = $77.48686986 rounded off to $77.49

Explanation:

The two stage growth model of DDM will be used to calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,

P0 = D0 * (1+g1) / (1+r)  +  D0 * (1+g1)^2 / (1+r)^2  +  ...  +  D0 * (1+g1)^n / (1+r)^n  +   [(D0 * (1+g1)^n  *  (1+g2) /  (r - g2))  /  (1+r)^n]

Where,

P0 = 1.55 * (1+0.25) / (1+0.14)  +  1.55 * (1+0.25)^2 / (1+0.14)^2  +  

1.55 * (1+0.25)^3 / (1+0.14)^3  +  1.55 * (1+0.25)^4 / (1+0.14)^4  +

1.55 * (1+0.25)^5 / (1+0.14)^5  +  1.55 * (1+0.25)^6 / (1+0.14)^6  +

1.55 * (1+0.25)^7 / (1+0.14)^7  +  1.55 * (1+0.25)^8 / (1+0.14)^8  +  

[(1.55 * (1+0.25)^8  *  (1+0.08)  / (0.14 - 0.08))  /  (1+0.14)^8]

P0 = $77.48686986 rounded off to $77.49

P0 = $174.3396226 rounded off to $174.34

if i need to borrow money for anything, it would be for something like a house or an apartment but, that depend on the situation.

is this good enough?

answerthe united states of america;