Investment calculations *show work*

label Business
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

If a dividend of $1.50 per share is expected to be paid next yr.  and it's expected to grow at 2.5% per yr. Indefinitely. The required return on similar shares are 5% what is the current stock price? 

Oct 16th, 2017

1.5/(1+.05)+1.5*1.025/(1.05)2 +1.5*1.0252/(1.05)3+…

1.5/1.05 { 1+(1.025/1.05) + (1.025/1.05)2+…..}

= 1.5/1.05 * 1/( 1-1.025/1.05)

= 1.5/1.05* (1.05 /1.05-1.025)= 1.5 /(0.025)= 1.5*40 =60

Current stock price = $60

Apr 3rd, 2015

Did you know? You can earn $20 for every friend you invite to Studypool!
Click here to
Refer a Friend
...
Oct 16th, 2017
...
Oct 16th, 2017
Oct 17th, 2017
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer