Question

Problem Walk-Through Maxwell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 5% per year. If D0 = $6 and rs = 14%, what is the value of Maxwell Mining's stock? Round your answer to the nearest cent.

answer is ?=

Answer 1

Price per stock of Maxwell is $30.00

Dividend growth rate	-5%
This year dividend	$      6.00
Expected Return	14%
Next year expected dividend	$      5.70
Based on the dividend discount model
Price per stock of Maxwell is	$   30.00

Formulas

Divident growth rate	-0.05
This year dividend	6
Expected Return	0.14
Next year expected divident	=B3*(1+B2)
Based on dividend discount model
Price per stock of Maxwell is	=B5/(B4-B2)