Thirsty Cactus Corp. just paid a dividend of $2.20 per share. The dividends are

Question

Thirsty Cactus Corp. just paid a dividend of $2.20 per share. The dividends are expected to grow at 22 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the price of the stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

Thirsty Cactus Corp. just paid a dividend of $2.20 per share. The dividends are expected to grow at 22 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the price of the stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

share price= dividend/ rate of return required - growth rate

= 2.2/ 0.14-0.22

= 2.2/0.08

= 27.5

it will be $27.5

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