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kolbaska11 [484]
3 years ago
5

just paid its annual dividend of $1.15 per share. The required return is 12.3 percent and the dividend growth rate is 0.75 perce

nt. What is the expected value of this stock five years from now
Business
1 answer:
IceJOKER [234]3 years ago
7 0

Answer:

P5 = 10.41

Explanation:

To calculate the stock value with dividends for the fifth year the following formula would be used:

P5 = \frac{Div_{0}  * (1 + g)^{6} }{(r-g)}

  • Where:
  1. Div_{0} = The first Dividend Paid.
  2. G = Growth Rate.
  3. R = Required Return.
  • Given Data:

Div_{0} = $1.15

Growth Rate = 12.3%

R = 0.75%

P5 = ?

  • Substituting the values in the formula

P5 = \frac{1.15 * (1 + .0075)^{6} }{(12.3-.0075)} = 10.41

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