dividend of $0.42 per share in three years. This dividend will grow at 11 percen

Question

dividend of $0.42 per share in three years. This dividend will grow at 11 percent indefinitely. Use a 12 percent discount rate. Compute the value of this stock. (Round your answer to 2 decima dividend of $0.42 per share in three years. This dividend will grow at 11 percent indefinitely. Use a 12 percent discount rate. Compute the value of this stock. (Round your answer to 2 decima dividend of $0.42 per share in three years. This dividend will grow at 11 percent indefinitely. Use a 12 percent discount rate. Compute the value of this stock. (Round your answer to 2 decima

Explanation / Answer

Value after year 3=(Dividend for year 3*Growth rate)/(Discount rate-Growth rate)

=(0.42*1.11)/(0.12-0.11)=$46.62

Hence current price=Future dividends*Present value of discounting factor(12%,time period)

0.42/1.12^3+46.62/1.12^3

which is equal to

=$33.48(Approx).

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