Question

Village East expects to pay an annual dividend of $1.40 per share next year, and $1.68 per share for the following two years. After that, the company plans to increase the dividend by 3.4 percent annually. What is this stock's current value at a discount rate of 13.7 percent

Answer 1

Answer:

$15.15

Explanation:

Given:

• D1 = $1.4
• D2 = $1.68  
• Growth = 3.4% = 0.034
• Discount rate = 13.7 % = 0.137

As we know that:

• P3= ($1.68 × (1+034)) / (0.137 - 0.034)= $16.86

So, P0:

= $1.40 / 1.137 + $1.68 / 1.1372 + ($1.68+ $16.86)/ 1.1373

= $15.15

Hope it will find you well.