Question

​Canadian-based mining company El Dorado Gold​ (EGO) suspended its dividend in March 2016 as a result of declining gold prices and delays in obtaining permits for its mines in Greece. Suppose you expect EGO to resume paying annual dividends in two years​ time, with a dividend of ​$0.45 per​ share, growing by 2.8 % per year. If​ EGO's equity cost of capital is 9.4 % ​, what is the value of a share of EGO​ today?

The value of a share of EGO today is ​$____

Answer 1

Year Cash flows $0.00 $0.45 $7.01 pv @ 9.4% 0.9141 0.8355 0.8355 Present value $0.00 $0.38 $5.86 $6.23 Price at year 2 (0.45*1.028)/(0.094-0.028) Current value of stock