Estes Park Corp. pays a constant $8.30 dividend on its stock. The company will m
ID: 2776348 • Letter: E
Question
Estes Park Corp. pays a constant $8.30 dividend on its stock. The company will maintain this dividend for the next 14 years and will then cease paying dividends forever. If the required return on this stock is 12 percent, what is the current share price?
Estes Park Corp. pays a constant $8.30 dividend on its stock. The company will maintain this dividend for the next 14 years and will then cease paying dividends forever. If the required return on this stock is 12 percent, what is the current share price?
Explanation / Answer
Ans) Year Dividend Discounted Factor @ 12% Discounted Cash flows 1 $ 8.30 0.893 $ 7.41 2 $ 8.30 0.797 $ 6.62 3 $ 8.30 0.712 $ 5.91 4 $ 8.30 0.636 $ 5.27 5 $ 8.30 0.567 $ 4.71 6 $ 8.30 0.507 $ 4.21 7 $ 8.30 0.452 $ 3.75 8 $ 8.30 0.404 $ 3.35 9 $ 8.30 0.361 $ 2.99 10 $ 8.30 0.322 $ 2.67 11 $ 8.30 0.287 $ 2.39 12 $ 8.30 0.257 $ 2.13 13 $ 8.30 0.229 $ 1.90 14 $ 8.30 0.205 $ 1.70 Market price of the share $ 55.01 There is no dividend from 15th year onwards Current Market price of the Share = $ 55.01
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