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Kandle stock just paid a dividend of $4.76 per share and plans to pay a dividend...

Kandle stock just paid a dividend of $4.76 per share and plans to pay a dividend of $5 per share next year, which is expected to increase by 3 percent per year subsequently. The required rate of return is 15 percent. What is the value of Kandle stock, using the dividend discount model?
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Answer #1

Dividend discounting method is used to find the share present value by discounting the predicted dividend

Formula is,

Value of share = (Dividend per share/ Discount rate) -Dividend growth rate

Let's put all the values in the formula

= 5/ 0.15 -0.03

= 5/ 0.12

= 41.67

So the price of the stock is $41.67

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