Doctors-On-Call,a newly formed medical group,just paid a dividend of $.50 a share.The dividends are expected to increase by 20 percent a year for the next two years and then increase by 3 percent annually thereafter.What is the current value of a share if the appropriate discount rate is 12 percent?

Question

Quizplus · Accepted Answer

P₂ = ($.50 × 1.2² × 1.03)/(.12 - .03)= $8.24P₀ = ($.50 × 1.2)/1.12 + [($.50 × 1.2²)+ $8.24]/1.12² = $7.68

Doctors-On-Call,a Newly Formed Medical Group,just Paid a Dividend of