text: This is the application of two stage dividend discount model.\n\nDiscount the dividend received at the cap rate for the first 5 years.  Dividend grows at 6.17% (1.005^12-1).  It would be $21.77\n\nThe second stage is 100% payout of earnings.  Assuming earnings grow at the same rate, the Year 6 earnings would be  $12.70 at which point, it is an instrument paying perpetual dividend at the same rate.  At the cap rate, that means the price at Year 5 is $141.17 (12.70/0.09) which when discounted at 9% is $91.75 (141.17/(1.09^5)).\n\nAdd these two values to get the stock price = 91.75 + 21.77 = 113.52