A high growth firm's stock is forecast to pay its first dividend of $12 in...
60.1K
Verified Solution
Link Copied!
Question
Accounting
A high growth firm's stock is forecast to pay its first dividend of $12 in 3 years (t=3 yrs). The dividend will be paid semi-annually and is forecast to grow at 4% every 6 months for 2 years (t=3 to t=5 yrs). After the last dividend in year 5 (t=5 yrs), the firm's industry is likely to face strong competition from overseas and the dividend is actually forecast to shrink. After year 5, the dividend is thus expected to grow at a rate of -1% every 6 months, forever. The required return of the stock is 10.25% pa given as an effective annual rate (EAR). The growth rates are all given as effective 6 month rates. What is the best estimate of the share price? Select one:
A. $269.28
B. $186.13
C. $184.61
D. $261.54
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.