Lara Williams is interested in purchasing the ordinary shares of Nillahcoote Ltd which is currently priced at $38.45. The company is now on a fast growth phase and experts its dividends to grow at a rate of 23 percent for the next 4 years. The dividends will then settle to a constant-growth rate of 6 percent. The first dividend will be paid at the end of year 3 and be equal to $4.25. If the required rate of return is 17 percent,

(1) what is the current value of the share? ( Show will workings)

(2) Critically evaluate your decision as to whether or not it is a good buy at the current price? 

Answer rating: 100% (QA)

To solve this problem we need to use the multistage dividend discount model DDM to determine the current value of the Nillahcoote Ltd share Given info... View the full answer