In: Finance
The Copperfield Auction House is growing quickly. Dividends are expected to grow at 21.04% for the next three years, after which growth is expected to be a constant 2.93%. The required return is 15.52% and the company just paid a $1.77 annual dividend. What is the current share price? (Round all intermediate steps to 4 digits) (Round Answer to nearest penny)
Select one:
a. $ 22.48
b. $ 25.72
c. $ 27.78
d. $ 19.98
e. $ 20.17
Current Share price= a $22.48 | ||||
Statemnet showing Current Price | ||||
Particulars | Time | PVf 15.52% | Amount | PV |
Cash inflows (Dividend) | 1.00 | 0.8657 | 2.1424 | 1.85 |
Cash inflows (Dividend) | 2.00 | 0.7494 | 2.5932 | 1.94 |
Cash inflows (Dividend) | 3.00 | 0.6487 | 3.1388 | 2.04 |
Cash inflows (Price) | 3.00 | 0.6487 | 25.6612 | 16.65 |
Current Price of Stock | 22.48 | |||
P3= D4/ke-g | ||||
P3 = 3.1388*1.093/(15.52% - 2.93%) | ||||
P3 = 3.2307*1.093/(12.59%) | ||||
P3 = $25.6612 |