Question
Hi, could you please help me. I don't understand how can we get the share price(Nov. 2016) = $41.22 Wesfarmers just paid $1.86 as dividend
Hi, could you please help me. I don't understand how can we get the share price(Nov. 2016) = $41.22
Wesfarmers just paid $1.86 as dividend per share. It is expected to increase its dividend by 2% per year forever, and the expected return is 7.46%. What should be its current share price?
D0 = 1.86, g = 2%,R = 7.46% (why?CAPM Ch.)
D1 = 1.86*1.02;D2 = 1.86*1.02^2...
We use constant growth formula(DDM):
Intrinsic value, P0 = D0(1+g)/(R-g)
= 1.86*1.02/(0.0746-0.02) = $34.74
Share price(Nov. 2016) = $41.22
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
