Need math help: What is the value per share of your Firm's stock?

label Mathematics
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

Your company has a required rate of return 7%. The company has completed a new
project that
is expected to grow dividends at a rate of 50% the first year an
d 25% the
following year, after which growth should be at a constant rate of 6%. The last dividend paid was 1.00. What is the value per share of your Firm's stock?

Nov 18th, 2015

Thank you for the opportunity to help you with your question!

9Rerured rate of returnKe7%
Constant Growth rateg6%
Last DividedD01
Year 1Year 2
Value of future dividends
Using formula
P0 = D1/Ke-g$ 198.75
D1 = 1.875*106%
Present value factor (7%)0.9345790.873439
Present value$  1.40$ 175.23
Total present value$ 176.64

Please let me know if you need any clarification. I'm always happy to answer your questions.
Nov 18th, 2015

Studypool's Notebank makes it easy to buy and sell old notes, study guides, reviews, etc.
Click to visit
The Notebank
Nov 18th, 2015
Nov 18th, 2015
Oct 21st, 2017
Mark as Final Answer
Unmark as Final Answer
Final Answer

Secure Information

Content will be erased after question is completed.

Final Answer