ABC’s last dividend paid was $7.68, its required return is 21%, its growth rate is 6%. What is ABC's expected stock price in 11 years?
Current price=D1/(Required return-Growth rate)
=(7.68*1.06)/(0.21-0.06)
=$54.272
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
Hence expected price =$54.272*(1.06)^11
=$54.272*1.898298558
=$103.02(Approx).
ABC’s last dividend paid was $7.68, its required return is 21%, its growth rate is 6%....
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