A stock just paid a dividend of $2.47. The dividend is expectedto grow at 23.57%...

A stock just paid a dividend of $2.47. The dividend is expected to grow at 23.57% for three years and then grow at 4.01% thereafter. The required return on the stock is 13.91%. What is the value of the stock? Round to 2 decimal places. Also, a stock just paid a dividend of $1.49. The dividend is expected to grow at 25.13% for five years and then grow at 3.72% thereafter. The required return on the stock is 11.24%. What is the value of the stock? Round to 2 decimal please.

Expert Solution

The value of stock will be calculated using dividend discounting model.

Current price of share= expected dividend/(required rate of return - growth rate)

A. Current share price at the end of year 3= (2.47*123.57%*123.57%*123.57%*104.1%)/(.1391-.0401)= (4.8474260/.099)=48.9638

Current share price= 48.9638/(1.1391)^3=$33.127

2. Share price of the company at the end of year 5= (1.49*(125.13%)^5*103.72%)/(.1124-.0372)= (4.74084/.0752)= 63.04

Current share price of the company= (63.04/(1.1124)^5=$37.011

jeff jeffy answered 2 years ago

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