You are considering purchasing ordinary shares that are expected to pay a constant annual dividend of...
You are considering purchasing ordinary shares that are expected to pay a constant annual dividend of $5 per share for the next 4 years, after which the dividend is expected to grow at 10% p.a. forever.
If the required rate of return on this share is 1.4%, what is the theoretical price of this share?
Homework Answers
The question has typo of "required on this share is 1.4%", it should be "required return on this share is 14%"
Price=5/1.14+5/1.14^2+5/1.14^3+5/1.14^4+5/1.14^4*1.1/(14%-10%)=95.97960
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