Hanson limited paid recently a dividend of Ksh 10.00 per share. Hansen has a beta coefficient...

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Hanson limited paid recently a dividend of Ksh 10.00 per share. Hansen has a beta coefficient of 0.83, an equity risk premium of 9.45%. The risk-free rate of return is 4.65 percent (Hint. CAPM MODEL). An analyst has estimated that Hanson's dividend per share will grow initially at a constant rate of 20 percent for two years and then decline linearly to 5 percent over a 10-year period. Thereafter, growth rate will remain constant indefinitely. • Compute the price of Hanson Limited share today • Compute the price of Hanson Limited share, three years from now. 10 MARKS Hanson limited paid recently a dividend of Ksh 10.00 per share. Hansen has a beta coefficient of 0.83, an equity risk premium of 9.45%. The risk-free rate of return is 4.65 percent (Hint. CAPM MODEL). An analyst has estimated that Hanson's dividend per share will grow initially at a constant rate of 20 percent for two years and then decline linearly to 5 percent over a 10-year period. Thereafter, growth rate will remain constant indefinitely. • Compute the price of Hanson Limited share today • Compute the price of Hanson Limited share, three years from now. 10 MARKS

Answer rating: 100% (QA)

To compute the price of Hanson Limited share today we can use the constant growth dividend discount ... View the full answer