Lohn Corporation is expected to pay the following dividends over the next four y

Question

Lohn Corporation is expected to pay the following dividends over the next four years: $16, $12, $11, and $6.50. Afterward, the company pledges to maintain a constant 6 percent growth rate in dividends forever. If the required return on the stock is 16 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Lohn Corporation is expected to pay the following dividends over the next four years: $16, $12, $11, and $6.50. Afterward, the company pledges to maintain a constant 6 percent growth rate in dividends forever. If the required return on the stock is 16 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

PVF@16% Present value D1 $                    16.00 0.862 $              13.79 D2 $                    12.00 0.743 $                8.92 D3 $                    11.00 0.641 $                7.05 D4 $                       6.50 0.552 $                3.59 D5 $                       6.89 P4 $                    68.90 0.552 $              38.05 $6.89/(16%-6%) Share price $              71.40

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