Shekel has decided to buy LMN Ltd shares that has just paid an annual dividend of $3.50 per share. The dividends are expected to grow at 10% a year for each of the next 3 years, and then settle down to 5% a year indefinitely. If Shekel has a 12% required rates of return, calculate the price of the bond and explain how many shares he can buy. (Show all calculations and show answer correct to decimals places)

Answer rating: 100% (QA)

The formula for the price of a stock using the DDM is Price D1 r g Where D1 Dividend expected to be ... View the full answer