Campbell Supper Co. paid a $0.662 dividend per share in 2013, which grew to $0.80 in 2016. This growth is expected to continue. What is the value of this stock at the beginning of 2017 when the required return is 8.3 percent?
FV = PV(1+g)^n
0.80 = 0.662 ( 1+ g)^3
(1+g)^3 = 0.8 / 0.662
= 1.2085
1+g = 1.2085 ^ ( 1/3)
= 1.0651
g = 1.0651 - 1
= 0.0651 i.e 6.51%
P0 = D1 / [ Ke - g ]
D1 = D0 (1+g)
= 0.80 ( 1 + 0.0651 )
= 0.80 (1.0651)
= 0.8521
P0 = D1 / [ Ke - g ]
= 0.8521 / [ 8.3% - 6.51% ]
= 0.8521 / 1.79%
= $ 47.60
Campbell Supper Co. paid a $0.662 dividend per share in 2013, which grew to $0.80 in...