Answer:
$15.61
Explanation:
The Dividend valuation Model would be used to value the stock which is given as under:
Po = Do * (1 + g) / (r - g)
Here
Po is the value of stock now
Do is the dividend just paid
g is the dividend growth rate
And
r is the required rate of return of the investors.
By putting values, we have:
Po = $1.46 * (1 + 3.5%) / (15% - 3.5%) = $13.14
Now this is the value of stock now, so to find the value of stock after 5 years, we will have to compound this value at the growth rate.
So, mathematically:
Future value of Unit share = Share value Now * (1 + g)^n
Here Future value is at 5 years time which means n = 5 years.
g is 3.5% and share value now is Po which is $13.14 per share.
So by putting values, we have:
Future value of Unit share = $13.14 * (1 + 3.5%)^5 = $15.61 per share
