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Marcel Co. is growing quickly. Dividends are expected to grow at a rate of 0.20 for...

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Finance

Marcel Co. is growing quickly. Dividends are expected to grow ata rate of 0.20 for the next 4 years, with the growth rate fallingoff to a constant 0.01 thereafter. If the required return is 0.14and the company just paid a $1.95 dividend, what is the currentshare price? Answer with 2 decimals (e.g. 45.45).

Answer & Explanation Solved by verified expert
3.9 Ratings (756 Votes)
In this question we need to find the cash flow of each year from this stock then discount those cash inflows using the discount rate PV of the cash inflow will be price of the stock Lets first calculate Dividend of each year Year Last year dividend Growth rate    See Answer
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Marcel Co. is growing quickly. Dividends are expected to grow ata rate of 0.20 for the next 4 years, with the growth rate fallingoff to a constant 0.01 thereafter. If the required return is 0.14and the company just paid a $1.95 dividend, what is the currentshare price? Answer with 2 decimals (e.g. 45.45).

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