Grouper Mechanical Inc.’s first dividend of $3.4 per share is expected to be paid six years...
Grouper Mechanical Inc.’s first dividend of $3.4 per share is expected to be paid six years from today. From then on, dividends will grow by 10 percent per year for five years. After five years, the growth rate will then slow to 5 percent per year in perpetuity. Assume that Grouper’s required rate of return is 16 percent. What is the price of a share of Grouper Mechanical today? (Round present value factor calculations to 5 decimal places, e.g. 1.15612. Round other intermediate calculations to 3 decimal places, e.g. 1.156 and final answer to 2 decimal places, e.g.115.61.) Price of the stock $
Homework Answers
What is the price of a share of Grouper Mechanical today
=3.4/(1+16%)^6+(3.4*(1+10%)^1)/(1+16%)^7+(3.4*(1+10%)^2)/(1+16%)^8+(3.4*(1+10%)^3)/(1+16%)^9+(3.4*(1+10%)^4)/(1+16%)^10+(3.4*(1+10%)^5)/(1+16%)^11+((3.4*(1+10%)^5*(1+5%))/(16%-5%))/(1+16%)^11
=17.58
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