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

timer Asked: Nov 18th, 2015
account_balance_wallet $5

Question Description

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?

Tutor Answer

School: Carnegie Mellon University

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

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