Giant Film Company just paid a dividend of $3 per share yesterday and has an EPS of $3 and a required return of 10 percent per year. Please answer the following questions: a. If Giant Film’s future dividends are expected to stay at $3 forever, what’s Giant Film’s current stock price? b. If Giant Film’s future dividends are expected to grow at 5% per year, what’s Giant Film’s current stock price?
a. price = dividend/required rate = 3/0.1 = 30
b.
As per DDM |
Price = recent dividend* (1 + growth rate )/(cost of equity - growth rate) |
Price = 3 * (1+0.05) / (0.1 - 0.05) |
Price = 63 |
Giant Film Company just paid a dividend of $3 per share yesterday and has an EPS...
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The
Herjavec Co just paid a dividend of 2.00 per share on its stock.
The dividends are expected to grow at a constant rate of 4 percent
per year indefinitely. Investors require a return of 12 percent on
the company's stock.
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