Janicex Co. is growing quickly. Dividends are expected to grow at a rate of 24 p

Question

Janicex Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 12 percent and the company just paid a dividend of $3.85, what is the current share price?

Janicex Co. is growing quickly. Dividends are expected to grow at a rate of 24 percent for the next three years, with the growth rate falling off to a constant 5 percent thereafter. If the required return is 12 percent and the company just paid a dividend of $3.85, what is the current share price?

Explanation / Answer

1.90(1.24) / 1.11 +
1.90(1.24^2) / 1.11^2 +
1.90(1.24^3) / 1.11^3 +
{ [1.90(1.24^3)(1.06)]/(0.11 - 0.06)] } / 1.11^3

I'll let you do the math....

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