Anton, Inc., just paid a dividend of $1.95 per share on its stock. The dividends

Question

Anton, Inc., just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4.1 percent per year, indefinitely. Assume investors require a return of 10.2 percent on this stock.

What is the current price?

What will the price be in 3 years and in 15 years?

Anton, Inc., just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 4.1 percent per year, indefinitely. Assume investors require a return of 10.2 percent on this stock.

Explanation / Answer

Current price = D1/(r-g) = 1.95*1.041/(10.2%-4.1%) =$33.28

Price in 3 years = D4/(r-g) = 1.95*1.041^4/(10.2%-4.1%) =$37.54

in 15 years = D16/(r-g) = 1.95*1.041^16/(10.2%-4.1%) =$60.80

Current price = D1/(r-g) = 1.95*1.041/(10.2%-4.1%) =$33.28

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