Christine Law is the Chief Investment Officer for Elite Investment Company. She is now calculating the equity
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Christine Law is the Chief Investment Officer for Elite Investment Company. She is now calculating the equity value of Rays Food Company. In 2018, Elite paid a dividend of $5 per share. By 2022, that dividend had grown to $5.72 per share. The company paid $5.15, $5.40, and $5.62 per share in 2019, 2020, and 2021, respectively.
What is the growth rate for each year? Calculate the average growth rate of the stock. In 2022, the company paid the $5.72 dividend. Christine believes that the company’s dividends will grow constantly at the average growth rate calculated. If the required return is 10%, what is the value of the stock?
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Step by Step Answer:
To calculate the growth rate for each year we can use the formula for the annual growth rate A...View the full answer
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