Homework Answers
Dividend last paid (D0) = $3.40
D(n-1) = Dn * (1 + g)
D1 = $3.40 *1.29 = $4.386
D2 = $4.386 * 1.29 = $5.65794
D3 = $5.65794 * 1.29 = $7.298743
Terminal value at end of year 3 = $7.298743 * 1.073 / (0.15 - 0.073) = $101.7085
Current Share price = Present value of all cash flows from the stock
Current Share price = [$4.386 / (1.15)1] + [$5.65794 / (1.15)2] + [$7.298743 / (1.15)3] + [$101.7085 / (1.15)3]
Current Share price = $3.813913 + $4.278216 + $4.799042 + $66.87496
Current Share price = $79.77
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