Investors require a return of 14.8% per year to hold a stock. The stock currently does...

Question

Question

business finance

Answer 1

Answer #1

Statement showing Computations
Particulars	Amount
P2 = D3/(ke-g)
Where P0 is the price
Ke is the required return	14.80%
g is the growth rate	8.00%
D3 is dividend at end of year 3	1.65
P2 = 1.65/(14.80% - 8%)
P2 = 1.65/6.8%
P2 = 24.26

Stock price = 24.26*(1/1.148)^2	18.41

Answer 2

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