You are an equity analyst working for an investment bank. You are analysing Company ABC shares. The last year's dividend (Do) was 40 pence. You are predicting 10% dividend growth for next 3 years and 8 % for the following 2 years, and thereafter dividend growth is assumed to slow for the foreseeable future to 5%.  The required rate of return on equity is deemed to be 12%. 

 

Calculate the fair value price of the share.  

What is the fair value of the share at the end of year 5?  

Answer rating: 100% (QA)

To calculate the fair value price of the share we can use the dividend discount model DDM The DDM va... View the full answer