Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 29 pe
ID: 2625871 • Letter: Y
Question
Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 29 percent for the next three years, with the growth rate falling off to a constant 7.3 percent thereafter.
If the required return is 15 percent and the company just paid a $3.40 dividend, what is the current share price? (Hint: Calculate the first four dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Required:If the required return is 15 percent and the company just paid a $3.40 dividend, what is the current share price? (Hint: Calculate the first four dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Explanation / Answer
it is the present price of all the future cash flow so,
Stock Price = (3.4*1.29/1.15)+(3.4*1.29^2/1.15^2)+(3.4*1.29^3/1.15^3)+(3.4*(1.29^3)*(1.073))/((1.15^3)*(.15-.073)) = $79.77
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