Thirsty Cactus Corp. just paid a dividend of $2.30 per share. The dividends are

Question

Thirsty Cactus Corp. just paid a dividend of $2.30 per share. The dividends are expected to grow at 23 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 15 percent, what is the price of the stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

Thirsty Cactus Corp. just paid a dividend of $2.30 per share. The dividends are expected to grow at 23 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 15 percent, what is the price of the stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

P8 = 2.30 * 1.23^8 * 1.07/(0.15-0.07) = 161.16

stock price = 2.30 * 1.23/1.15 + 2.30* 1.23^2/1.15^2 + 2.30* 1.23^3/1.15^3 + 2.30* 1.23^4/1.15^4 + 2.30* 1.23^5/1.15^5 + 2.30* 1.23^6/1.15^6 + 2.30* 1.23^7/1.15^7 +   2.30* 1.23^8/1.15^8 + 161.16/1.15^8

= 77.88

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