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Oriole Corp. will pay dividends of $5.00, $6.25, $4.75, and $3.00 in the next four years. Thereafter, management expects the dividend growth rate to be constant at 8 percent. If the required rate of return is 17.50 percent, what is the current value of the stock

Respuesta :

haseebkhuhro256

Answer:

Explanation:

Dividend growth model for the valuation of stock

                           Year Year Year Year  

                           1              2            3             4  

                                                    8%  

Dividend                   5       6.25 4.75   3  

Ifninty dividend                            34.42  

Total Cashflows  5          6.25       4.75        37.42  

Present value        1.02    4.52 2.92 19.63  

Value 28.11    

Dividend growth model

Do(1+g)/Ke-g

3(1+8%)/17.5%-8% =34.42