## Dividend Growth Model:

One approach of stock valuation is to price the stock to the discounted present value of the stock. The dividend growth model in addition assumes dividend grows at a constant rate g. Given next projected dividend D, and the required return R, the price of the stock is D / (R - g).

The price of the stock is $118.65. Applying the dividend growth model, the price of the stock = last dividend payment *(1 + growth rate) / (required return - growth rate ) = 3.39*(1 + 5%)/(8% - 5%) =$118.65.