A | B | C | D | E | F | G | H | I | J | K |
2 | ||||||||||
3 | As per dividend growth model, Price of share is the present value of all future dividends discounted at cost of equity. | |||||||||
4 | Current Price of Share (P) | =Div0*(1+g)/(r-g) | ||||||||
5 | Where Div0 is the dividend paid this year, r is cost of equity and g is perpetual growth rate of dividend. | |||||||||
6 | ||||||||||
7 | Given the following data: | |||||||||
8 | Dividend (Div0) | $1.95 | ||||||||
9 | Cost of equity (r) | 11% | ||||||||
10 | Growth rate (g) | 6.0% | ||||||||
11 | ||||||||||
12 | From Dividend growth model, | |||||||||
13 | Share Price, P | =Div0*(1+g)/(r-g) | ||||||||
14 | $41.34 | =D8*(1+D10)/(D9-D10) | ||||||||
15 | ||||||||||
16 | Hence Current Share Price is | $41.34 | ||||||||
17 | ||||||||||
18 | Calculation of Share Price at Year 3: | |||||||||
19 | ||||||||||
20 | Given the following data: | |||||||||
21 | Dividend (Div3) | $2.32 | =D8*((1+D10)^3) | |||||||
22 | Cost of equity (r) | 11% | ||||||||
23 | Growth rate (g) | 6.0% | ||||||||
24 | ||||||||||
25 | From Dividend growth model, | |||||||||
26 | Share Price at year 3, P3 | =Div3*(1+g)/(r-g) | ||||||||
27 | $49.24 | =D21*(1+D23)/(D22-D23) | ||||||||
28 | ||||||||||
29 | Hence Share Price at Year 3 is | $49.24 | ||||||||
30 | ||||||||||
31 | Calculation of Share Price at Year 15: | |||||||||
32 | ||||||||||
33 | Given the following data: | |||||||||
34 | Dividend (Div15) | $4.67 | =D8*((1+D23)^15) | |||||||
35 | Cost of equity (r) | 11% | ||||||||
36 | Growth rate (g) | 6.0% | ||||||||
37 | ||||||||||
38 | From Dividend growth model, | |||||||||
39 | Share Price at year 15, P15 | =Div15*(1+g)/(r-g) | ||||||||
40 | $99.07 | =D34*(1+D36)/(D35-D36) | ||||||||
41 | ||||||||||
42 | Hence Share Price at Year 15 is | $99.07 | ||||||||
43 |
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