New Trade Ltd is foreseeing a growth rate of 15% per annum in the next three years. It is likely to fall to 12 per cent in the fourth year. After that, the growth rate is expected to stabilize at 7 per cent per annum. If the last dividend paid was Rs.10 per share and the investors required rate of return is 20 per cent, calculate the maximum price at which you will be prepared to buy the company’s shares.

Answer rating: 100% (QA)

Sol Using the dividend discount model and discounting the cash flows Year Particular Cash Flow PV... View the full answer