A company is growing at a constant rate of 8%. Last week it paid a dividend of $3.00. If the required rate of return is 15%, what is the price of the share three years from now?
My initial thought was to calculate the present value, and then just compound it to a FV that is 3 years from now.
Here's what I did,
PV = 3/ (0.15-0.08)
and then FV = PV(1.15)^3 = $65.18
But this is apparently incorrect. The correct answer is 58.31 according to my book. Why is that?