Carnes Cosmetics Co.'s stock price is $60, and it recently paid a $1.75 dividend. This dividend is expected to grow by 22% for the next 3 years, then grow forever at a constant rate, g; and rs = 11%. At what constant rate is the stock expected to grow after Year 3? Do not round intermediate calculations. Round your answer to two decimal places.
|Year||Previous year dividend||Dividend growth rate||Dividend current year||Discount factor||Discounted value|
|Current dividend =||Previous year dividend*(1+growth rate)^corresponding year|
|Discount factor=||(1+ Required rate)^corresponding period|
|Discounted value=||total value/discount factor|
horizon value = (current price-PV of dividends)*(1+required rate)^3
|horizon value= Dividend year 3* (1 + growth rate )/(cost of equity - growth rate)|
|73.3594 = 3.177734 * (1+Growth rate) / (0.11 - Growth rate)|
|Growth rate% = 6.39|
Get Answers For Free
Most questions answered within 1 hours.