Upton Co. is growing quickly. Dividends are expected to grow at 24 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 14 percent and the company just paid a dividend of $1.75, what is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g. 32.16.)
Current share price $_______
D1=(1.75*1.24)=2.17
D2=(2.17*1.24)=2.6908
D3=(2.6908*1.24)=3.336592
Value after year 3=(D3*Growth rate)/(Required return-Growth rate)
=(3.336592*1.05)/(0.14-0.05)
=38.9269067
Hence current price=Future dividend and value*Present value of discounting factor(rate%,time period)
=2.17/1.14+2.6908/1.14^2+3.336592/1.14^3+38.9269067/1.14^3
=$32.50(Approx).
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