elevation systems, incorporated, expects its dividends to grow at 25 percent per year for the next seven years before levelling off to a constant 3 percent growth rate. the required return is 11 percent. what is the current stock price if the annual dividend per share that was just paid was $1.05?

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04-11-2022
Business

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elevation systems, incorporated, expects its dividends to grow at 25 percent per year for the next seven years before levelling off to a constant 3 percent growth rate. the required return is 11 percent. what is the current stock price if the annual dividend per share that was just paid was $1.05?

Answer :

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AnkitaNagar AnkitaNagar · Answer 1 · 2022-11-09T10:27:10-05:00

Elevation systems, incorporated, expects its dividends to grow at 25 percent per year for the next seven years. $43.21 will be the current stock price.

Calculating the problem:

P7 = [$1.05 (1.25)× 7× (1.03)] ÷ (0.11 − 0.03)

P7 = $64.46

P0 = [$1.05 (1.25) ÷ (0.11 − 0.25)] [1 − (1.25/1.11) 7] + $64.4 ÷ 1.117

P0 = $43.21

What's current stock price?

Current price is the most recent price at which a security was vended on an exchange. Current price serves as a birth for buyers and merchandisers.

How is stock price calculated?

To figure out how precious the shares are for dealers, take the last streamlined value of the company share and multiply it by outstanding shares. Another system to calculate the price of the share is the price to earnings rate.

Learn more about stock price:

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