Question
In: Finance
The last dividend paid by Coppard Inc. was $1.25. The dividend growth rate is expected to...
The last dividend paid by Coppard Inc. was $1.25. The dividend growth rate is expected to be constant at 22.5% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm's required return (rs) is 11%, what is its current stock price?
Select the correct answer.
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Solutions
Expert Solution
| Year | Dividen | Dividend | PVF@ 11% | PV P1 (2*3) |
| 1 | 1.25*1.225^1 | 1.53 | 0.9009 | 1.3795045 |
| 2 | 1.25*1.225^2 | 1.88 | 0.8116 | 1.52242614 |
| 3 | 1.25*1.225^3 | 2.30 | 0.7312 | 1.68015498 |
| 3 | price at 3 | 48.760 | 0.7312 | 35.653312 |
| Total | 40.2353976 | |||
| price at year 3 = | Dividend 3 * (1+G)/ (Ke-G) | |||
| 2.30*1.06/ ( 0.11-0.06) | ||||
| 48.76 |
NOTE:
PV @ 11 = 1/1.11^n where n = years
jeff jeffy answered 1 year agoRelated Solutions
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