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melamori03 [73]
2 years ago
5

Burkhardt Corp. pays a constant $15.25 dividend on its stock. The company will maintain this dividend for the next 9 years and w

ill then cease paying dividends forever. If the required return on this stock is 9.2 percent, what is the current share price
Business
1 answer:
faust18 [17]2 years ago
6 0

Answer:

$90.69

Explanation:

Current share price can be determined by calculating the present value of the cash flows

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow in year 1 to 9 = 15.25

I = 9.2

PV = 90.67

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

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PLAN A

                                Weights      Cost of capital      WACC

Debt                         3.0 %                    15 %                0.45%    

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