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?

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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 1 year ago

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