Sam is considering buying a share with the following expected dividends: Time (yrs) Dividend (S) 0...
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Sam is considering buying a share with the following expected dividends: Time (yrs) Dividend (S) 0 2.00 1 2.10 2 2.15 The dividend is expected to grow by 1% pa in perpetuity after Year 3. Therefore: . The dividend at t=4 will be $2.20(1+0.01) . The dividend at t=5 will be $2.20(1+0.01)^2, and so on. 3 2.20 1 Shareholders' required return is 5% pa. The required return and the growth rate are effective annual returns. Calculate the price of the stock in two and a half years (t=2.5) Sam is considering buying a share with the following expected dividends: Time (yrs) Dividend (S) 0 2.00 1 2.10 2 2.15 The dividend is expected to grow by 1% pa in perpetuity after Year 3. Therefore: . The dividend at t=4 will be $2.20(1+0.01) . The dividend at t=5 will be $2.20(1+0.01)^2, and so on. 3 2.20 1 Shareholders' required return is 5% pa. The required return and the growth rate are effective annual returns. Calculate the price of the stock in two and a half years (t=2.5)
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To calculate the price of the stock in two and a half years t25 we need to determine the pr... View the full answer
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
Posted Date:
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