Anton, Inc., just paid a dividend of $2.90 per share on its stock. The dividends

Question

Anton, Inc., just paid a dividend of $2.90 per share on its stock. The dividends are expected to grow at a constant rate of 4.75 percent per year, indefinitely. Assume investors require a return of 9 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 six years and in thirteen years? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Anton, Inc., just paid a dividend of $2.90 per share on its stock. The dividends are expected to grow at a constant rate of 4.75 percent per year, indefinitely. Assume investors require a return of 9 percent on this stock.

Explanation / Answer

P0 = D1/(ke-g) P0 = 2.90*1.0475/(9%-4.75%) P0 = 3.04/(4.25%) P0 = $71.48 P6 = D7/(ke-g) P6 = 2.90*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475/(9%-4.75%) P6 = 4.01/(9%-4.75%) P6 = $94.43 P13 = D14/(ke-g) P13 = 2.90*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475*1.0475/(9%-4.75%) P13 = 5.55/(9%-4.75%) P13 = $130.67

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