Question
In: Finance
Get In Shape, Inc. just came up with a revolutionary new way to get in shape...
Get In Shape, Inc. just came up with a revolutionary new way to get in shape without exercising. The current dividend is $3.00 per share. Analysts are predicting 30% growth in the stock of GIS for the next three years, then after that, growth is expected to level off at 6%. The rate expected in the marketplace for stock such as GIS is 8%.
What is the current value of a share of Get In Shape, Inc.? ________________
What will the value of a share be in year 4? _________________
What will the value be in year 6? ______________________
Solutions
Expert Solution
| 8.0000% | ||
| Cash flows | Year | Discounted CF |
| - | 0 | 0.00 |
| 3.90 | 1 | 3.61 |
| 5.07 | 2 | 4.35 |
| 6.59 | 3 | 5.23 |
| 349.32 | 3 | 277.30 |
Current value of the share = 290.49
value in year 4 = 6.59*1.06*1.06/(0.08-0.06) = 370.28
value in year 6 = 370.28*1.06*1.06 = 416.05
jeff jeffy answered 3 years agoRelated Solutions
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