Question

A Corporation announced of its plans to pay:

$2 dividend per share in 1 year,

$4 dividend per share in 2 years,

$6 dividend per share in 3 years,

after which the dividend will be increasing at a constant annual growth rate of 6 percent. The rate of return for this company is 11%. Calculate the value of one share of stock of this company.

Part of the calculation will be finding the Present Value of a

1. ordinary annuity
2. annuity due
3. regular perpetuity
4. growing perpetuity

…with the first dividend being

1. $2
2. $4
3. $6
4. $87.74
5. $92.79
6. $97.39
7. $102.44
8. $113.71

(Increase decimal places for any intermediate calculations, from the default 2 to 6 or higher. Only round your final answer to TWO decimal places: for example, 100.23.) The final numerical answer to this problem is:

Answer 1

I have answered the question below using excel and have attached the image below.

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

Part A of this calculation will focus upon finding Present Value of Dividends which are growing every year. Hence, we are required to find "Present Value of growing perpetuity"

First Dividend will be Option (A) = $2

Calculation of Share Price :-

Market Price = 102.44