In: Finance
The Jackson–Timberlake Wardrobe Co. just paid a dividend of $2.00 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. Investors require a return of 12 percent on the company's stock. |
A. What is the current stock price?
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A ) Market Price=Expected Dividend / (Ke-g)
=D0(1+g) / (Ke-g)
=2(1+.04) / (12%-4%)
=2.08 / 8% = $ 26
B) Market Price after 3 Years = D0(1+g)4
= 2 (1.04)4/ 8%
= $ 29.25
C) Market Price after 12 Years = D0(1+g)13
= 2 (1.04)13/ 8%
= $ 40.02