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A company's dividend grows at a constant rate of 3 percent p. Last week it paid a dividend of \$2. If the required rate of return is 13 percent p.

A company's dividend grows at a constant rate of 3 percent p.a.. Last week it paid a dividend of \$2.40. If the required rate of return is 13 percent p.a., what is the price of the share 5 years from now? (round to nearest cent)

price of the... View the full answer

• hello the option of answer is between a) 28.66 and b) 27.82 some people have answered a and some people b are you sure this is the answer?
• kkaebit
• May 10, 2018 at 4:37am
• Hi. This is the most accurate approach to solving the question. \$28.66 is thus the correct solution. Thank you
• joeytutor
• May 10, 2018 at 4:48am
• thank you
• kkaebit
• May 10, 2018 at 4:51am
• you are welcome
• joeytutor
• May 10, 2018 at 4:53am

Here is the solution... View the full answer

The solution is... View the full answer

• hello the option of answer is between a) 28.66 and b) 27.82 some people have answered a and some people b are you sure this is the answer?
• kkaebit
• May 10, 2018 at 4:37am
• apologies, stock price as on year 5 = div 6 / (r-g)= 2.866/10% = 28.66
• payaljain3
• May 10, 2018 at 4:42am

Price of share 5... View the full answer

Attached is a detailed explanation... View the full answer

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