Question

Common stock value: Constant growth Seagate Technology is a global leader in data storage solutions and a high-yield dividend payer. From 2015 through 2019, Seagate paid the following per-share dividends: Year 2019 2018 2017 2016 2015 Dividend per share $2.52 2.25 1.83 1.19 1.52 Assume that the historical annual growth rate of Seagate dividends is an accurate estimate of the future constant annual dividend growth rate. Use a 20% required rate of return to find the value of Seagate's stock immediately after it paid its 2019 dividend of $2.52. The value of Seagate's stock is $ Round to the nearest cent.)

Answer 1

Solution:

This question is based on Dividend discount model and we need to find the terminal growth rate for finding the terminal value. We can use CAGR for terminal value growth rate.

Solution is given in the below image and answer is 22.85

1.52) Growth of Dividend CAGR = | 2.52 ] 74_1 = 1.1347= 0.1347 = long teen growlane t is given that required rate of retwin = 207. Dividends aue 1:52, 1.19. 1.83 ,2.25 and 2.52 Let's find the terminal Value of Dividend TV: Dividend in 2019 x (1 + growth rate) [ Required rate of retwein - growth rate) = 2:52X (1+0.1347) - 2.86 - 43.80 (.20 -0.1347) 0.0653 Using DDM model to find shove poice (htrite liiget Litojat tuntungant kitos +(85+ TV) = 1.52 + 119 + 1.83 + 2.25 +2:52 443.80) (1+0-20) " (1+0.2)2 (1+0.2)3+ (1+0.234 (170.235 = 1.27 + 6.83 + 1.06 + 4.01 +17.60 = 22.85 Shavce poice: 22.85