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Pfizer paid its stockholders a dividend of $5 per share yesterday. Today, the company announced that...

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Finance

Pfizer paid its stockholders a dividend of $5 per shareyesterday. Today, the company announced that they plan to increasethat dividend by $1.00 per share for each of the next three years.After that, they plan to keep their dividend at $8 per shareforever. The variance of Pfizer’s stock is .09, the variance of themarket is .04, and the correlation between Pfizer’s stock and themarket is .05. The risk-free rate is 3% and the market-risk premiumis 5.7%. Pfizer has $100 million shares of stock outstanding and$50 million of debt. The YTM for its is 8%. Use the dividenddiscount model to find the price per share of Pfizer’s stock.

Answer & Explanation Solved by verified expert
3.6 Ratings (559 Votes)
First we need to calculate beta of the Pfizers stock using below formula Beta of a stock correlation between stock and marketstocks standard deviationmarkets standard deviation Standard deviation of stock Variance12 00912 03 Standard deviation of market 00412 02 Beta 0050302    See Answer
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