Sea Side, Inc., just paid a dividend of $1.68 per share on its stock. The growth...

Sea Side, Inc., just paid a dividend of $1.68 per share on its stock. The growth rate in dividends is expected to be a constant 5.5 percent per year indefinitely. Investors require a return of 18 percent on the stock for the first three years, then a return of 13 percent for the next three years, and then a return of 11 percent thereafter. What is the current share price?

Expert Solution

Current share price of the company will be calculated using the current required rate of return using dividend discounting model with constant growth.

Current share price= (expected dividend in next year)/(Required rate of return - Growth Rate)

= (1.68(1+.055)/(.18-.055)

= (1.7724/12.5%)

= $ 14.1792

Current price of share is $14.18.

jeff jeffy answered 2 years ago

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