Question

Please show how it would be done on EXCEL

gilmore, Inc., just paid a dividend of $2.35 per share on its stock. The dividends are expected to grow at a constant rate of 4.1 percent per year, indefinitely. If investors require a return of 10.4 percent on this stock. What is the current price? What will the price be in three years? and in fifteen years?

Answer 1

Particulars	Formula	Amount	Calculation
D1	D0(1+g)	2.44635	2.35*1.041
D2	D1(1+g)	2.54665	2.45*1.041
D3	D2(1+g)	2.651063	2.55*1.041
D4	D3(1+g)	2.759757	2.65*1.041
D5	D4(1+g)	2.872907	2.76*1.041
D6	D5(1+g)	2.990696	2.87*1.041
D7	D6(1+g)	3.113314	2.99*1.041
D8	D7(1+g)	3.24096	3.11*1.041
D9	D8(1+g)	3.37384	3.24*1.041
D10	D9(1+g)	3.512167	3.37*1.041
D11	D10(1+g)	3.656166	3.51*1.041
D12	D11(1+g)	3.806069	3.66*1.041
D13	D12(1+g)	3.962117	3.81*1.041
D14	D13(1+g)	4.124564	3.96*1.041
D15	D14(1+g)	4.293671	4.12*1.041
D16	D15(1+g)	4.469712	4.29*1.041

Current Price = D1 / (Ke-g)

= 2.45 /(0.104 - 0.041)

= 2.45 / 0.063

= $ 38.89

Price be in 3 years

P3 = D4 / (Ke-g)

= 2.76 / (0.104 - 0.041)

= 2.76 / 0.063

= $ 43.81

Price be in 3 years

P15 = D16 / (Ke-g)

= 4.47 / (0.104 - 0.041)

= 4.47 / 0.063

= $ 70.95

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