Question
You are analyzing a relatively new company. As such, they do not currently pay a dividend. In their most recent shareholder meeting they announced the
You are analyzing a relatively new company. As such, they do not currently pay a dividend. In their most recent shareholder meeting they announced the anticipation of paying a dividend of $1/share with the first one occurring 5 years from today. As you have analyzed this company you have noticed an annual growth rate of 5% in earnings and anticipate that once dividends occur they would have constant growth of 5% per year as well. If you assume a required return of 8% what value would you place on the stock price today? (Round to the nearest cent. With no dollar sign. i.e. 20.10)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started