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Kobotan [32]
3 years ago
6

You are evaluating shares in Honeywell International (HON). They currently pay an annual dividend of $4.00 per share this year a

nd expect to raise that by 5% per year every year in the future. If you use a discount rate of 10%, what is the value of HON shares(to two decimal places)?
Business
1 answer:
xxTIMURxx [149]3 years ago
7 0

Answer:

$84

Explanation:

Calculation for what is the value of HON shares

Using this formula

Value of HON shares=(Expected dividend next year)/(Discount rate -Growth rate of dividend)

Let plug in the formula

Value of HON shares= 4(1+.05)/(.10-.05)

Value of HON shares= (4.2/ .05)

Value of HON shares= $84

Therefore the Value of HON shares will be $84

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