Managerial Finance-Equities

Question

Company A just paid a dividend of $1.00 per share. The dividend is expected to grow 5 percent a year for the next 3 years & then 10 percent there after.

a. What is the expected dividend per share for each of the next 5 years.

b. What is the price of the share today if the required rate of return is 20 percent.

Answer 1

year 1 - 1.05

year 2 - 1.10

year 3 - 1.16 growth at 5%

year 4 - 1.27 growth at 10%

year 5 - 1.40

P0 = (CF register): $9.66 Hope this helps!