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Todd’s Turtles is expected to increase dividends by 20% in one year and by 15% in...

Todd’s Turtles is expected to increase dividends by 20% in one year and by 15% in two years. After that, dividends will increase at a rate of 5% per year indefinitely. The last dividend was $1, the required return is 12%, what is the current price of the stock? A. $6.90 B. $8.67 C. $10.10 D. $13.72 E. $13.04

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Expert Solution

Year Particulars Cash flow × discount rate Present value
1 Dividend               1.20             0.89286 $            1.07
2 Dividend               1.38             0.79719 $            1.10
2 Share price             20.70             0.79719 $          16.50
1.38*(1+ 0.05) /( 0.12-0.05)
Stock price today $          18.67

Stock price is 18.67

jeff jeffy answered 1 year ago
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