Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 30 pe

Question

Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 6.5 percent thereafter.

If the required return is 13 percent and the company just paid a $3.00 dividend, what is the current share price? (Hint: Calculate the first four dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

If the required return is 13 percent and the company just paid a $3.00 dividend, what is the current share price? (Hint: Calculate the first four dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Price = (3*1.3/1.13)+(3*1.3^2/1.13^2)+(3*1.3^3/1.13^3)+(3*1.065*(1.3^3)/((1.13^3)*(.13-.065)) = $86.83

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.