Question

Could I Industries just paid a dividend of $1.34 per share. The dividends are expected to grow at a rate of 19.3 percent for the next five years and then level off to a growth rate of 6 percent indefinitely. If the required return is 10 percent, what is the value of the stock today?

(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Price of the stock is calcualte by solving the below equation:

Below is the schdelu to verify:

Year	CF	Discount Factor	Discounted CF
1	$                 1.60	1/(1+0.1)^1=	0.909090909	0.909090909090909*1.59862=	1.45
2	$                 1.91	1/(1+0.1)^2=	0.826446281	0.826446280991735*1.90715366=	1.58
3	$                 2.28	1/(1+0.1)^3=	0.751314801	0.751314800901578*2.27523431638=	1.71
4	$                 2.71	1/(1+0.1)^4=	0.683013455	0.683013455365071*2.71435453944134=	1.85
5	$                 3.24	1/(1+0.1)^5=	0.620921323	0.620921323059155*3.23822496555352=	2.01
5	$               85.81	1/(1+0.1)^5=	0.620921323	0.620921323059155*85.8129615871683=	53.28
				NPV = Sum of all Discounted CF	61.89