Churchill Downs stock is expected to grow at 1.4% indefinitely, and the last dividend was 5$. If the relevant risk return is 4.2%, what would you be willing to pay for the stock.
Ans $ 181.07
P0 = | Price of Share |
D1 = | Current Dividend |
Ke = | Cost of Equity |
g = | growth rate |
P0 = | D1 / (Ke - g) |
P0 = | 5.07 / (4.2%- 1.4%) |
P0 = | 181.07 |
D1 = | D0* (1 + g) |
D1 = | 5* (1 + 1.4%) |
D1 = | 5.0700 |
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