Could I Industries just paid a dividend of $1.15 per share. The dividends are expected to grow at a rate of 18 percent for the next six years and then level off to a growth rate of 7 percent indefinitely. If the required return is 15 percent, what is the value of the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
D0 = 1.15
D1 = 1.15( 1+ 0.18) = 1.357
D2 = 1.357( 1+ 0.18) = 1.60126
D3 = 1.60126( 1+ 0.18) = 1.8894868
D4 = 1.8894868( 1+ 0.18) = 2.229594424
D5 = 2.229594424( 1+ 0.18) = 2.63092142032
D6 = 2.63092142032( 1+ 0.16) = 3.10448727597
Value of Stock =
where r = 0.15
G = 0.07
=
= $25.51
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