7.7 Constant growth: Maurica Ltd is a consumer products company growing at a constant rate of...

7.7 Constant growth: Maurica Ltd is a consumer products company growing at a constant rate of 6.5 per cent. The company’s last dividend was $3.36. If the required rate of return was 14 per cent, what is the market value of this share?

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Expert Solution

Market Value = Expected Dividend / (Requried Return - Growth rate)

= Current Dividend * (1+Growth Rate) /(Requried Return - Growth rate)

= $ 3.36*(1+6.5%) /(14%-6.5%)

= $ 3.5784/7.5%

= $ 47.712

Answer = $ 47.71

jeff jeffy answered 2 years ago

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