Question

Problem 9-11 Valuation of a constant growth stock A stock is expected to pay a dividend of $1.00 the end of the year (that is, D1 = $1.00), and it should continue to grow at a constant rate of 4% a year. If its required return is 1496, what is the stocks expected price 3 years from today? Round your answer to two decimal places.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Answer:

Problem 9 - 11

What is the stock's expected price 3 years from today?

Current Price = D1 / (ke - g) = 1/(0.14-0.04) = $10

Price after 3 years = 10(1 + 0.04)^3 = $11.25

Microtech Corporation 1.5 D 4 1.25 (1.36) 1.70 D5-1.70 (1.36)2.312 Compute D 6-2315 (1.05)-2.4276 just to use for constant growth model (DVM) for valuing dividends from year 6 to infinity P 5-D 6 / (kg)-2.4276 / (0.18-0.05)-$80.92

Add a comment
Know the answer?
Add Answer to:
Problem 9-11 Valuation of a constant growth stock A stock is expected to pay a dividend...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT