Assume RHM is expected to pay a total cash dividend of $5.60 next

Assume RHM is expected to pay a total cash dividend of $5.60 next

FIN 571 CH5 A10. (Dividend discount model)

A10. (Dividend discount model) Assume RHM is expected to pay a total cash dividend of $5.60 next year and its dividends are expected to grow at a rate of 6% per year forever. Assuming annual dividend payments, what is the current market value of a share of RHM stock if the required return on RHM common stock is 10%?

Return on common stock = (D1/P0) + g