Constant Growth Valuation – Future Stock Price: Bessemer Steel recently paid a dividend of $5.00 per...
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Constant Growth Valuation – Future Stock Price: Bessemer Steel recently paid a dividend of $5.00 per share, which is expected to grow at a constant rate of 3% per year. Bessemer’s stock is currently trading at a market price of $42.92 per share. The required rate of return is 15%. What is the expected price of the stock 5 years from today?
Homework Answers
P5=Current price*(1+Growth rate)^5
=42.92*(1.03)^5
which is equal to
=$49.76(Approx).
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