Upton Co. is growing quickly. Dividends are expected to grow at 26 percent for the next three
Question:
Upton Co. is growing quickly. Dividends are expected to grow at 26 percent for the next three years, with the growth rate falling off to a constant 4.5 percent thereafter. If the required return is 10.4 percent and the company just paid a dividend of $2.45, what is the current share price?
Step by Step Answer:
With differential dividends we find the price of the stock when the ...View the full answer
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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This model assumes that the required rate of return will remain the same for the foreseeable future and also assumes that the growth rate is going to be constant. The same results will be obtained using the sustainable growth rate formula that states g = b x ROI
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