A company has just paid an annual dividend of 15 cents per share and that dividend is expected to grow at a rate of 20% per annum for the next 3 years and at a rate of 5% per annum forever after that. Assuming a required rate of return of 10%, calculate the current market price of the share

A company has just paid an annual dividend of 15 cents per share and that dividend is expected to grow at a rate of 20% per annum for the next 3 years and at a rate of 5% per annum forever after that. Assuming a required rate of return of 10%, calculate the current market price of the share

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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