Investment calculations *show work*

Business & Finance
Tutor: None Selected Time limit: 1 Day

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? 

Apr 3rd, 2015

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

Are you studying on the go? Check out our FREE app and post questions on the fly!
Download on the
App Store
...
Apr 3rd, 2015
...
Apr 3rd, 2015
Dec 5th, 2016
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