Question
the problem: Upper Gullies Corp. just paid a dividend of $2.20 per share. The dividends are expected to grow at 22 percent for the next
the problem:
Upper Gullies Corp. just paid a dividend of $2.20 per share. The dividends are expected to grow at 22 percent for the next eight years and then level off to a 7 percent growth rate indefinitely. If the required return is 14 percent, what is the price of the stock today?(Do not round intermediate calculations. Round the final answer to 2 decimal places.)
here is what I've done:
N=8
I/Y=22
PV=220
CPT FV=10.79695587
10.79695587 x 1.07= 11.55274278
11.55274278/ (.14-.07)
=165.0391826
N=8
I/Y=14
FV=165.0391826
CPT PV= 57.85597986
Now, I know because it is a growingannuityI must factor this in,
I am not sure if the equation i need is the supernormal growth rate? And if so t=0 correct? but then how many of the D1/(1+r) etc would i need to figure out?
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