text: company abc's earnings and dividends will grow at  0.5% monthly during the next five years.?   this is the application of two stage dividend discount model.  discount 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  the 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)).  add these two values to get the stock price = 91.75 + 21.77 = 113.52