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 |

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****show step****

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