Homework Answers
Last Dividend, D0 = $2.90
Growth rate for next 3 years is 21% and a constant growth rate (g) of 6% thereafter
D1 = $2.9000 * 1.21 = $3.5090
D2 = $3.5090 * 1.21 = $4.2459
D3 = $4.2459 * 1.21 = $5.1375
D4 = $5.1375 * 1.06 = $5.4458
Required Return, rs = 9.00%
P3 = D4 / (rs - g)
P3 = $5.4458 / (0.09 - 0.06)
P3 = $181.5267
P0 = $3.509/1.09 + $4.2459/1.09^2 + $5.1375/1.09^3 +
$181.5267/1.09^3
P0 = $150.93
So, current share price is $150.93
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