Christina, Erika, Rusty, Delaney, Samy -- several similar questions from the same person -- without any attempt at posting what you don't understand -- is a big turnoff for Jiskha tutors. We expect students to make an effort be and be explicit about what they don't understand.
In addition, we have no regular volunteer tutors whose expertise is finance.
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))
5 answers
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
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
5) PV of Growing Annuity (From t=0 to infinity) = 18.25
6) 51.31 + 18.25 = 69.56
6) 51.31 + 18.25 = 69.56
I wanted to know how you calculated for present value of the growing annuity.
how did you calculate the present value of growing annuity?
0 answers