Use the CGM to find the current stock price for IBM. We will call this the theoretical price or Po. The formula to calculate Po = D1 / (ks-g) Here Po stands for the current price of the common stock. D1 represents the dollar amount of the dividend expected one period from now. ks represents the required rate of return per period on the common stock investment...
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ks represents the required rate of return per period on the common stock investment. g is equal to the expected constant growth rate per period of the company's common stock dividends. Utilizing the numbers we have already accumulated we can then find our theoretical price as follows D1 = 0.80 (1+0...
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