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s344n2d4d5 [400]
2 years ago
13

Burton Corp. is growing quickly. Dividends are expected to grow at a rate of 28 percent for the next three years, with the growt

h rate falling off to a constant 7.4 percent thereafter. If the required return is 16 percent and the company just paid a dividend of $3.45, what is the current share price
Business
1 answer:
horrorfan [7]2 years ago
4 0

Answer:

current share price = $70.53

Explanation:

Share Price:

A share price is the amount it would cost to buy one share in a company.

Formula:

share price = future dividends * Present value of discount factor(16%, time period)

As the company just paid a dividend of $3.45 and dividends are expected to grow at a rate of 28 percent for the next three years so

Dividend for 1st year = (3.45*1.28) = $4.416

Dividend for 2nd year = (4.416*1.28) = $5.65248

Dividend for 3rd year = (5.65248*1.28) = $7.2351744

Now we need to calculate the value for 3rd year.

Formula:

Value after 3rd year = (Dividend for year 3*growth rate) / (required rate-growth rate)

Therefore by putting the values in the above formula, we get

Value after 3rd year = (7.2351744 * 1.074) / (0.16 - 0.074)

Value after 3rd year = $90.35555007

Therefore by putting the values in the share price formula, we get

current share price = 4.416 / 1.16 + 5.65248 / 1.16^2 + 7.2351744/1.16^3 + 90.35555007 / 1.16^3

current share price = $70.53

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Answer:

Factorization of the expression = [m - 8n²][m + 8n²]  

Explanation:

Given expression;

m²- 64n⁴​

Find:

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Using formula;

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By putting value in above formula;  

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Factorization of the expression  = m²- [(8n²)]²​

Factorization of the expression  = (m)²- [(8n²)]²​

Factorization of the expression = [m - 8n²][m + 8n²]  

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