Question

Anton, Inc., just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4.1 percent per year, indefinitely. If investors require a return of 10.2 percent on this stock, what is the current price? What will the price be in three years? In 15 years?

Answer 1

Answer:

current price = $33.28

for 3 year current price = $37.54

for 15 year current price = $60.82

Explanation:

given data

dividend = $1.95 per share

rate = 4.1 %

return = 10.2 %

to find out

current price , price in 3 year and 5 year

solution

we will apply here current price formula that is

current price = dividend / ( return rate - rate )    ...............1

put here value

current price = 1.95 × (1.041)  /  ( 10.2 - 4.1 )

current price = 2.03 / 0.061

current price = $33.28

and

for 3 year from equation 1

current price = dividend / ( return rate - rate )

current price = 1.95 × $(1.041)^{4}$  /  ( 10.2 - 4.1 )

current price = 2.29 / 0.061

current price = $37.54

and

for 15 year

from equation 1

current price = dividend / ( return rate - rate )

current price = 1.95 × $(1.041)^{16}$  /  ( 10.2 - 4.1 )

current price = 3.71 / 0.061

current price = $60.82