Answer:
Price per share = $10.99
Explanation:
The dividednd are growing at 7% per annum for 2 year so we will use the DCF approach to calculate price of the share today. We will also calculate the terminal value after 2 years when growth becomes constant and discount it back to today to calculate the price today.
The formula for DCF approach and calculations are below:
P0 = D0*(1+g) / 1+r + ... + [D0(1+g)^n / r-g] / (1+r)^n
P0 = 0.6*(1+0.07) / 1 + 0.1 + 0.6*(1+0.07)² / (1+.01)² + [(0.6*(1+0.07)²*(1+0.04)/0.1-0.04] / (1+0.1)²
P0 = $10.9918 or 10.99
