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The ASX listed company Dinerodung has just released an announcement to the public regarding its dividend growth. At the end of the current fiscal year
The ASX listed company Dinerodung has just released an announcement to the public regarding its dividend growth. At the end of the current fiscal year 2021 (i.e. at t = 1), the company expects to pay a $0.71 per share dividend. The dividend will then grow at 26.0 percent the next year (at t = 2) and 30.0 percent in the following year (at t = 3). After that, the growth rate of dividend would level off at 6.0 percent a year. The company's equity cost of capital is 10.5 percent. [75% of marks] (a) What is Dinerodung's expected share price today? Dinerodung's expected share price today is $ (Give answer to 2 decimal places). [25% of marks] (b) What is Dinerodung's expected share price 10 years from today? (Hint: Share price growth rate is the same as dividend growth rate when the latter is stable.) Dinerodung's expected share price 10 years from today is $ (Give answer to 2 decimal places)
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