View the step-by-step solution to:

nalysts expect this This question was created from 1292018402_Fundamentals_Part2-3

This question was created from 1292018402_Fundamentals_Part2-3


CX Enterprises has the following expected​ dividends: ​$1 in one​ year, ​$1.13 in 2​ years, and ​$1.20 in 3 years. After​ that, its dividends are expected to grow at 5​% per year forever​ (so that year​ 4's dividend will be 5​% more than ​$1.20 and so​ on). If​ CX's equity cost of capital is 13​%, what is the current price of its​ stock? How would i solve this ?


Top Answer

The solution is... View the full answer

dividend calculation.PNG

  • that answer is still incorrect
    • mageban
    • Jun 02, 2018 at 2:12pm
  • I rechecked the calculations, it is correct
    • payaljain3
    • Jun 02, 2018 at 2:37pm
  • so i enter 13.517 not 15.75+13.517
    • mageban
    • Jun 02, 2018 at 2:39pm
  • Current price of stock = present values of future dividends and present value of stock price as per constant growth dividend, hence final answer for stock price is 13.52
    • payaljain3
    • Jun 02, 2018 at 2:41pm
  • 15.75 is the stock price as on year3, hence when we want present values, we discount it by 1/((1+0.13)^3)
    • payaljain3
    • Jun 02, 2018 at 2:49pm

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.


Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online