Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 20 p
ID: 2778391 • Letter: S
Question
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 20 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 11 percent, and the company just paid a dividend of $3.10, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 20 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 11 percent, and the company just paid a dividend of $3.10, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Statemnet showing Current Price Particulars Time PVf@11% Amount PV Cash inflows (Dividend) 1.00 0.9009 3.72 3.35 Cash inflows (Dividend) 2.00 0.8116 4.46 3.62 Cash inflows (Dividend) 3.00 0.7312 5.36 3.92 Cash inflows (Price)5.36*1.05/(11%-5%) 3.00 0.7312 93.74 68.54 Current Price of Stock 79.44
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