Asked by Samy

Thirsty Cactus Corp. just paid a dividend of $1.25 per share. The dividends are expected to grow at 28 percent for the next eight years and then level off to a 6 percent growth rate indefinitely. If the required return is 13 percent, what is the price of the stock today? (Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16))
Answered by Ms. Sue
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Answered by Alejandro
1) N=8 / I%=28 / PV=1.25 therefore FV = 9.008

2) 9.008 x 1.06 = 9.54848

3) 9.54848 / (.13-.06) = 136.41

4) N=8 / I%=13 / FV= 136.41 therefore PV = 51.31
Answered by Alejandro
5) PV of Growing Annuity (From t=0 to infinity) = 18.25

6) 51.31 + 18.25 = 69.56
Answered by how did you computeed for present value of the growing annuity?
I wanted to know how you calculated for present value of the growing annuity.


Answered by King
how did you calculate the present value of growing annuity?
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