Asked by Jack
DBP Inc. just paid a dividend of $2.50. The expected growth rate of dividend is 5 percent. The required return for investors in the first three years is 12 percent and 10 percent for the following three years. After those six years the required return is 8 percent. What is the current share price of the stock?
A. $74.94 B. $73.00 C. $70.74
Work:
2.5/ (1.12) + 2.5(1.05)/ (1.12^2) + 2.5(1.05^2)/ (1.12^3) + 2.75625/ (1.10) + 2.75625(1.05)/ (1.10^2) + 2.75625(1.05^2)/ (1.10^3) + 3.03876/ (.10-.05)
= 6.2866 + 7.1805 + 60.7753 = 74.66738855
A. $74.94 B. $73.00 C. $70.74
Work:
2.5/ (1.12) + 2.5(1.05)/ (1.12^2) + 2.5(1.05^2)/ (1.12^3) + 2.75625/ (1.10) + 2.75625(1.05)/ (1.10^2) + 2.75625(1.05^2)/ (1.10^3) + 3.03876/ (.10-.05)
= 6.2866 + 7.1805 + 60.7753 = 74.66738855
Answers
Answered by
Anonymous
74.98
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