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.
