Osweilers Apparel is a rapidly growing company. Its dividends are forecasted to grow at the following...

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Osweilers Apparel is a rapidly growing company. Its dividends are forecasted to grow at the following rates for the next thre

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Answer 1

Answer #1

Value of this stock is $ 62.51

As per dividend discount model, current share price is the sum of present value of future dividends.

Step-1:Present value of dividends of next 3 years

Year	Dividend	Discount factor	Present value
a	b	c=1.17^-a	d=b*c
1	$ 5.53	0.854701	$ 4.72
2	$ 6.91	0.730514	$ 5.05
3	$ 7.94	0.624371	$ 4.96

Total			$ 14.73

Step-2:Present value of dividends after year 3

Present value	=	D3(1+g)/(Ke-g)DF3			Where,
	=	$ 47.79			D3	=	$ 7.94
					g	=	6%
					Ke	=	17%
					DF4	=	0.624371


Step-3:Sum of present value of future dividends

Sum	=	$ 14.73	+	$ 47.79
	=	$ 62.51


So,
Price of stock is	$ 62.51

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Answer 2

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