Question

QUESTION FOUR –Share valuation Anderson Concrete Pty Limited (ACP) has introduced another product. As a result,...

QUESTION FOUR –Share valuation

Anderson Concrete Pty Limited (ACP) has introduced another product. As a result, dividends are expected to grow at 18% for the next 3 years. After that the growth rate will fall to 9% indefinitely. ACP has no long-term debt and its expected rate of return is 11.35%. The company just paid a dividend of $0.55 per share.

Required:

  1. Calculate the estimated value of ACP stock?
  2. What is the value of the stock at end of year 4?
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Answer #1

Please refer to the image below for the solution

a) $32.21

b) $45.68

Do let me know in the comment section in case of any doubt.

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