A stock just paid a dividend of $1.10. The dividend is expected to grow at 27.82% for five years and then grow at 3.56% thereafter. The required return on the stock is 11.74%. What is the value of the stock?
round to 2 decimal places
Year | t | Cash Flow |
Discounting Factor [1/(1.1174^t)] |
PV of Cash Flow (cash flow*discounting factor) |
||||
1 | 1 | 1.1 | + | 27.82% | = | 1.40602 | 0.89493467 | 1.258296044 |
2 | 2 | 1.406 | + | 27.82% | = | 1.797174764 | 0.800908063 | 1.439371759 |
3 | 3 | 1.7972 | + | 27.82% | = | 2.297148783 | 0.716760393 | 1.646505265 |
4 | 4 | 2.2971 | + | 27.82% | = | 2.936215575 | 0.641453726 | 1.88344642 |
5 | 5 | 2.9362 | + | 27.82% | = | 3.753070748 | 0.574059178 | 2.154484709 |
5 | 5 |
Terminal Value= [(1.3671875+3.56%)/(11.74%-3.56%)] |
47.51442624 | 0.574059178 | 27.27609248 | |||
Expected Share Price today =sum of PVs |
35.65819667 = $35.66 |
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