Synovec Corp. is experiencing rapid growth. Dividends are expected to grow at 24 percent per year...

Synovec Corp. is experiencing rapid growth. Dividends are expected to grow at 24 percent per year during the next three years, 14 percent over the following year, and then 8 percent per year, indefinitely. The required return on this stock is 10 percent and the stock currently sells for $86 per share. What is the projected dividend for the coming year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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Ans : According to gordon growth model, Price of the stock, if the growth rate is perpetual =

P =Dividend for next year/(Return on equity - growth rate)

86 = Dividend/(0.10-0.08)

86 = dividend /(0.02)

86*0.02 = dividend

dividend for next year = $1.72

jeff jeffy answered 2 years ago

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