Leisure Lodge Corporation is expected to pay the following dividends over the next four years: $22.00,...

Leisure Lodge Corporation is expected to pay the following dividends over the next four years: $22.00, $15.00, $6.80 and $3.30. Afterwards, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 16 percent, what is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Expert Solution

Statemnet showing Current Price
Particulars	Time	PVf 16%	Amount	PV
Cash inflows (Dividend)	1.00	0.8621	22.00	18.97
Cash inflows (Dividend)	2.00	0.7432	15.00	11.15
Cash inflows (Dividend)	3.00	0.6407	6.80	4.36
Cash inflows (Dividend)	4.00	0.5523	3.30	1.82
Cash inflows (Price)	4.00	0.5523	31.50	17.40
Current Price of Stock				53.69

P4 = d5/(ke-g)
P4 = 3.30*1.05/(16% - 5%)
P4 = 3.465/(11%)
P4= $31.50

jeff jeffy answered 1 year ago

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