Question

The last dividend paid by Coppard Inc. was $1.25. The dividend growth rate is expected to be constant at 42.5% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If the firm's required return (r_s) is 11%, what is its current stock price?

Select the correct answer.

$71.91

$75.83

$73.87

$74.85

$72.89

Please show all steps. Thank you!

Answer 1

The current stock price is the present value of all future dividends.

In the screenshot below, first, the dividends are projected with the given growth rates and then they are discounted. The sum of the discounted cash flows is the price of the stock.

The current price of the stock is $62.38 (None of the answer options match this answer)

Below screenshot shows the formula in each cell

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