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Company A has paid the following dividends per share: 2015: $3.00 2016: $4.50 2017:...

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Accounting

Company A has paid the following dividends per share:

2015: $3.00

2016: $4.50

2017: $5.00

2018: $5.50

2019: $6.00

1. Calculate the arithmetic average of dividend growth using the four years of increases.

2. Calculate the geometric average for dividend growth for 4 years (2015 base year to 2019).

3. Calculate the expected stock price using the arithmetic average. Assume a discount rate of 25%.

4. Calculate the expected stock price using the geometric average and the same discount rate.

5. Assume the stock price of Company A is $140.00. Indicate which estimate (3. or 4.) is closer to that price.

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