Saga TechInc. just paid a dividend of $4.00 per share (that is, DO=4.00) The dividends of SagaTech are expected to grow at a rate of 20 percent next year (that is, g1=.20) and at a rate of 10 percent the following year ( that is, g2=.10) Thereafter ( i.e., from year 3 to infinity) the growth rate in dividends is expected to be 5 percent per year. Assuming the required rate of return on Saga Tech, Inc. stock is 9 percent compute the current price of the stock . Record your answer as a dollar amount rounded to 2 decimal places , but do not include a dollar sign or any commas in your answer . For example , record $ 18,124.24985 as 18124.25 . Your Answer

Saga TechInc. just paid a dividend of $4.00 per share (that is, DO=4.00) The dividends of SagaTech are expected to grow at a rate of 20 percent next year (that is, g1=.20) and at a rate of 10 percent the following year ( that is, g2=.10) Thereafter ( i.e., from year 3 to infinity) the growth rate in dividends is expected to be 5 percent per year. Assuming the required rate of return on Saga Tech, Inc. stock is 9 percent compute the current price of the stock . Record your answer as a dollar amount rounded to 2 decimal places , but do not include a dollar sign or any commas in your answer . For example , record $ 18,124.24985 as 18124.25 . Your Answer

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 16P

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Saga Tech, Inc. just paid a dividend of $4.00 per share (that is, DO=4.00) The dividends of SagaTech are expected to grow at a rate of 20 percent next year (that is (1 = 0.2) and at a rate of 10 percent the following year (that is g2=.10) Thereafter i.e., from year 3 to infinity ) the growth rate in dividends is expected to be 5 percent per year . Assuming the required rate of return on Saga Tech Inc. stock is 9 percent . compute the current price of the stock . Record your answer as a dollar amount rounded to 2 decimal places , but do not include dollar sign or any commas in your answer . For example , record $ 18,124.24985 as 18124.25 .
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