Question

jackson hole stock paid a current dividend of $3 per she and this dividend is expected...

jackson hole stock paid a current dividend of $3 per she and this dividend is expected go grow at a rate of 18% for the first four years and then slow to a rate of 3% for the forseeable future, the interest rate is 11%. what is the correct price? write down the formula with thw appropriate numbers jnserted go solve the problem along with the correct answer
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Answer #1

Current Price = [{D0 * (1 + g1)} / (1 + r)] + [{D0 * (1 + g1)2} / (1 + r)2] + [{D0 * (1 + g1)3} / (1 + r)3] + [{D0 * (1 + g1)4} / (1 + r)4] + [{D0 * (1 + g1)4 * (1 + gC)} / {(r - g) * (1 + r)4}]

= [{$3 * (1 + 0.18)} / (1 + 0.11)] + [{$3 * (1 + 0.18)2} / (1 + 0.11)2] + [{$3 * (1 + 0.18)3} / (1 + 0.11)3] + [{$3 * (1 + 0.18)4} / (1 + 0.11)4] + [{$3 * (1 + 0.18)4 * (1 + 0.03)} / {(0.11 - 0.03) * (1 + 0.11)4}]

= $3.19 + $3.39 + $3.60 + $3.83 + $49.33 = $63.34

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