Waller Co. (WAG) paid a $0.138 dividend per share in 2006, which grew to $0.289
ID: 2781260 • Letter: W
Question
Waller Co. (WAG) paid a $0.138 dividend per share in 2006, which grew to $0.289 in 2012. This growth is expected to continue. What is the value of this stock at the beginning of 2013 when the required return is 13.8 percent? (Round the growth rate, g, to 4 decimal places. Round your final answer to 2 decimal places.) Waller Co. (WAG) paid a $0.138 dividend per share in 2006, which grew to $0.289 in 2012. This growth is expected to continue. What is the value of this stock at the beginning of 2013 when the required return is 13.8 percent? (Round the growth rate, g, to 4 decimal places. Round your final answer to 2 decimal places.) Waller Co. (WAG) paid a $0.138 dividend per share in 2006, which grew to $0.289 in 2012. This growth is expected to continue. What is the value of this stock at the beginning of 2013 when the required return is 13.8 percent? (Round the growth rate, g, to 4 decimal places. Round your final answer to 2 decimal places.)Explanation / Answer
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
Hemce
0.289=0.138(1+r/100)^6
(0.289/0.138)^(1/6)=(1+r/100)
(1+r/100)=1.1311055(Approx)
Hence r=(1.1311055-1)*100
=0.1311(Approx)
Hence price=Dividend for next period/(Required return-Growth rate)
=(0.289*1.1311)/(0.138-0.1311)
=$47.38(Approx).
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