The Peterman Company does not currently pay dividends. However, investors expect that, in 6 years, Peterman will pay it...

Question

Question

The Peterman Company does not currently pay dividends. However, investors expect that, in 6 years, Peterman will pay its firs

business accounting

Answer 1

Answer #1

If constant growth is there.

Price of Stock = DPS₁ / ( Required return - Growth )

Price of Stock at 6th year = 1.51 / ( 13% - 10% ) = $ 50.33.

Current price of stock = [ $ 50.33 / ( 1 + 0.13 )⁵ ]= $ 27.32

Answer 2

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