Today is March 20, 2013. Sweet Apple Inc has just paid its annual dividend of $1

Question

Today is March 20, 2013. Sweet Apple Inc has just paid its annual dividend of $10.40. Analyst predict that the next annual dividend will be $20, then $ 30 and after that the dividends will be growing at 10% forever. Investors required rate of return is 20%. What is the current share price? What is the expected dividend yield for this year? What is the expected Apple's price one year from now? What is the current share price? What is the expected dividend yield for this year? What is the expected Apple's price one year from now?

Explanation / Answer

Current Price = D1/1+Ke+D2/(1+ke)2+33/(ke-g)2(1+ke)2 Current Price ]= 20/1.2+30/(1.2)2+33/(1.2)2(.2-.1) Current Price = 16.67+20.833+229.1665 Current Price = 266.67

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