Question
Use the following data to calculate your stock value. Assume you use the historical geometric average growth rate (rounded to 2 decimals) for initial growth
Use the following data to calculate your stock value. Assume you use the historical geometric average growth rate (rounded to 2 decimals) for initial growth rate for 4 years. Then you believe it will drop to constant growth rate of 7% per year indefinitely.
Recent total dividend payments were $5Million and there are 5million shares outstanding.
T-bill rate was 3.2%, S&P500 mkt return was 6.61%, and beta of this company is 1.2.
| YEAR | DIVIDEND (*M represent millions) |
| 2015 | $1.10M |
| 2016 | $1.60M |
| 2017 | $2.20M |
| 2018 | $3.00M |
| 2019 | $3.90M |
| 2020 | $5.00M |
What is the stock price per share using dividend discount model?
If the H-Model is applied, what should be the stock value per share?
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Modern Financial Markets Prices, Yields, And Risk Analysis
Authors: Mark Griffiths, Drew Winters, David W Blackwell
1st Edition
0470000104, 9780470000106
