Could I Industries just paid a dividend of $1.92 per share. The dividends are ex
ID: 2771583 • Letter: C
Question
Could I Industries just paid a dividend of $1.92 per share. The dividends are expected to grow at a 19 percent rate for the next 3 years and then level off to a 6 percent growth rate indefinitely. If the required return is 11 percent, what is the value of the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Could I Industries just paid a dividend of $1.92 per share. The dividends are expected to grow at a 19 percent rate for the next 3 years and then level off to a 6 percent growth rate indefinitely. If the required return is 11 percent, what is the value of the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Explanation / Answer
Could I Industries Year Year 0 1 2 3 4 Discounting factor @11% 0.901 0.812 0.731 0.659 Dividend expected $/share 1.92 2.28 2.72 3.24 PV of dividends $ 8.55 1.92 2.06 2.21 2.37 Present Value of perpetual dividends receivable at the end of 4 years for 6% growth rate = 3.24(1+0.06)/(0.11-0.06) 68.688 PV of the perpetual dividend $ 45.25 Total PV of all dividend s receivable $ 53.80 So the current Market price is $ 53.80 per share