Anton, Inc., just paid a dividend of $2.85 per share on its stock. The dividends

Question

Anton, Inc., just paid a dividend of $2.85 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. Assume investors require a return of 10 percent on this stock.

What is the current price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

What will the price be in five years and in fourteen years? (Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).)

Anton, Inc., just paid a dividend of $2.85 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. Assume investors require a return of 10 percent on this stock.

Explanation / Answer

Answer:

Calculation of current price of the stock:

Formula :

Current Price = Last dividend * ( 1+ growth rate) / (Required rate – Growth rate)

=2.85*(1+0.045) / (0.10 -0.045)

= 2.97825 / 0.055

=$54.15

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