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Wildhorse Inc. has just paid a dividend of $3.80. An analyst forecasts annual dividend growth of...

Wildhorse Inc. has just paid a dividend of $3.80. An analyst forecasts annual dividend growth of 9 percent for the next five years; then dividends will decrease by 1 percent per year in perpetuity. The required return is 12 percent (effective annual return, EAR). What is the current value per share according to the analyst? Round present value factor calculations to 5 decimal places, e.g. 1.54667 and other intermediate calculations to 3 decimal places, e.g.15.612. Round final answer to 2 decimal places, e.g.15.61.)

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Answer #1

Dividend just paid(D0) = $3.80

Dividend is expected to grow(g) at 9% for next 5 years.

thereafter it will grow(g1) at 1% per year in perpetuity

Required Return(Ke) = 12%

Calculating the price of Stock:-

P0 = 3.698+3.599+3.503+3.409+3.318+30.462

P0 = $47.99

So, the current value per share according to the analyst is $47.99

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