Joshua S.

asked • 01/20/21

Finance share price question

A company pays a dividend of $0.005 in 2020. Assume this company will pay the same 2020 annual dividend amount in 2021, 2022, 2023 and 2024. The annual dividend in 2025 is predicted to be 50% higher than 2024’s annual dividend and is then forecast to increase at an annual rate of 5%. If the company’s required return is 10%, what is a fair value for one share in 2021, just after the 2021 dividend is paid. (3 marks)


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