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butalik [34]
3 years ago
8

Could I Industries just paid a dividend of $1.62 per share. The dividends are expected to grow at a rate of 20 percent for the n

ext four years and then level off to a growth rate of 4 percent indefinitely. If the required return is 12 percent, what is the value of the stock today
Business
1 answer:
nata0808 [166]3 years ago
4 0

Answer:

Explanation:

Using the dividend growth model = Do(1+g)/Ke-g

Do=1.62$

G=4%

Ke=12%

Do(1+g)/Ke-g  =  2.0736(1+4%)/12%-4%

                      =   1.6848

/8%

                      =   53.916

                 Year Year Year Year Year  

                    0             1             2           3            4  

                          20%  20%  20% 20%  

Dividend             1        1.2      1.44  1.728 2.0736  

Ifninty dividend                                               55.91*  

Total Cashflows 1    1.2     1.44         1.728 55.98  

Pres.Val @12%    1     1.07142 1.14795  1.22995   35.583

     

Value of stock 40.030    

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