Swanson Company’s long-run constant dividend growth is expected to be 12%. If the required return (rs)...

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Question

Swanson Company’s long-run constant dividend growth is expected to be 12%. If the required return (rs)...

Swanson Company’s long-run constant dividend growth is expected to be 12%. If the required return (rs) for Swanson is 15%, and the most recent dividend paid (D0) was $3.00, what is the most likely stock price one year from now?

- $132.90

-$144.50

-$124.00

-$125.44

-$122.30

business finance

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Answer 1

Answer #1

Current price=D1/(Required return-Growth rate)

=(3*1.12)/(0.15-0.12)

=112

Hence stock price one year from now=Current price*(1+Growth Rate)

112*1.12

=$125.44

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Answer 2

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