Suppose that your company is expected to pay a dividend of $1.50 per share next year....
Suppose that your company is expected to pay a dividend of $1.50 per share next year. There has been a steady growth in dividends of 5.1% per year and the market expects that to continue. What is the current price of the stock if the required return is 10%?
Price=
Homework Answers
| Price = $30.61 | |
| Statement showing Computations | |
| Particulars | Amount |
| P0 = D1/(ke-g) | |
| Where P0 is the price | |
| Ke is the required return | 10.00% |
| g is the growth rate | 5.10% |
| D1 is dividend at end of year | 1.50 |
| P0 = 1.5/(10% - 5.1%) | |
| P0 = 1.5/4.9% | |
| P0 = $30.61 |
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