Question 37 (0.2 points) Suppose a firm's expected dividends for the next three years are as...

Question

Question

Answer 1

Answer #1

Answer:
Current price of the firm's stock is 15.26

Calculation as under:
Year	Divd to be receive		PVF @ 0.12	= PV of all dividend
D1*	1.1000	X	0.89285714	0.982142857
D2	1.2000	X	0.79719388	0.956632653
D3	1.3000	X	0.71178025	0.925314322
D4**	19.5000	X	0.63551808	12.392602529

	Answer == >			15.256692361

*Assume to be received at end of 1st year
**forth year dividend is 3rd year divd plus 5% which is growing perpetually -
	- so PV of 4th year onwards dividend as on 4th year is calculated as below:
	Formula: D4 = (D4 + r%) / Ke - r
	1.30 + (1.30 * 5%)	=	19.5000
	0.12 - 0.05

Answer 2

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