DOC just paid a dividend of $.46 a share.The dividends are expected to increase by 30 percent a year for the next 2 years and then increase by 2 percent annually thereafter.What is the current value of a share if the appropriate discount rate is 15 percent?
A)$5.72
B)$6.91
C)$5.38
D)$6.26
E)$6.42

Question

Quizplus · Accepted Answer

P₂ = ($.46 × 1.3² × 1.02)/ (0.15 − 0.02)= $6.10 P₀ = ($.46 × 1.3)/ 1.15 + [($.46 × 1.3²)+ $6.10] / 1.15² = $5.72

DOC Just Paid a Dividend of