Violet Sky Consulting stock has an expected return of 17.54 percent and pays annual dividends that...

Violet Sky Consulting stock has an expected return of 17.54 percent and pays annual dividends that are expected to grow annually by 3.8 percent forever. The firm’s next dividend is expected in 1 year from today. If the firm’s dividend is expected to be 12.75 dollars in 6 years from today, then what is the current price of the stock?

Expert Solution

Based on the given data, pls find below workings and answer:

Answer: Current Price of the Stock is $ 77.01

Steps: Dividends from Year 1 to Year 5 are back-calculated using the given growth rate and Year 6 dividend; Then, the PV of the same are calculated; Terminal Dividend is used to calculate the terminal value with the formula given below;

jeff jeffy answered 1 year ago

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