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just paid its annual dividend of $1.15 per share. The required return is 12.3 percent and the dividend growth rate is 0.75 percent. What is the expected value of this stock five years from now

Respuesta :

Answer:

P5 = 10.41

Explanation:

To calculate the stock value with dividends for the fifth year the following formula would be used:

[tex]P5 = \frac{Div_{0} * (1 + g)^{6} }{(r-g)}[/tex]

  • Where:
  1. [tex]Div_{0} =[/tex] The first Dividend Paid.
  2. G = Growth Rate.
  3. R = Required Return.
  • Given Data:

[tex]Div_{0} =[/tex] $1.15

Growth Rate = 12.3%

R = 0.75%

P5 = ?

  • Substituting the values in the formula

[tex]P5 = \frac{1.15 * (1 + .0075)^{6} }{(12.3-.0075)} = 10.41[/tex]

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