Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. procter and gamble? (pg) paid an annual dividend o

Procter and Gamble? (PG) paid an annual dividend of $ 1.68 in 2009. You expect PG...

Free

70.2K

Verified Solution

Question

Finance

Procter and Gamble? (PG) paid an annual dividend of $ 1.68 in2009. You expect PG to increase its dividends by 7.3 % per year forthe next five years? (through 2014), and thereafter by 3.2 % peryear. If the appropriate equity cost of capital for Procter andGamble is 7.2 % per? year, use the? dividend-discount model toestimate its value per share at the end of 2009.

a.) What is the price per share?

**Please show all work!**

Answer & Explanation Solved by verified expert
3.9 Ratings (714 Votes)

Required rate= 7.20%
Year Previous year dividend Dividend growth rate Dividend current year Horizon value Total Value Discount factor Discounted value
1 1.68 7.30% 1.80264 1.80264 1.072 1.6816
2 1.80264 7.30% 1.93423272 1.93423272 1.149184 1.68314
3 1.93423272 7.30% 2.075431709 2.075431709 1.231925248 1.68471
4 2.075431709 7.30% 2.226938223 2.226938223 1.320623866 1.69
5 2.226938223 7.30% 2.389504714 61.649 64.03850471 1.415708784 45.23
Long term growth rate (given)= 3.20% Value of Stock = Sum of discounted value = 51.97
Where
Current dividend =Previous year dividend*(1+growth rate)^corresponding year
Total value = Dividend + horizon value (only for last year)
Horizon value = Dividend Current year 5 *(1+long term growth rate)/( Required rate-long term growth rate)
Discount factor=(1+ Required rate)^corresponding period
Discounted value=total value/discount factor

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: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Procter and Gamble? (PG) paid an annual dividend of $ 1.68 in2009. You expect PG to increase its dividends by 7.3 % per year forthe next five years? (through 2014), and thereafter by 3.2 % peryear. If the appropriate equity cost of capital for Procter andGamble is 7.2 % per? year, use the? dividend-discount model toestimate its value per share at the end of 2009.a.) What is the price per share?**Please show all work!**

Other questions asked by students

Q

What happens with blockage of fast sodium channels? Am I correct to say that it increases...

Medical Sciences
Q

home / study / business / operations management / operations management questions and answers / corning...

General Management
Q

Suppose X and Y are random variables with the given joint density function J0 1e...

Basic Math
Q

Complete the chart Grams Grams Kilograms Milligrams Centigrams 800 Kilograms Milligrams 800 Centigrams

Basic Math
Q

Which of the following tests is used to identify significant differences between multiple groups O...

Statistics
Q

y sec 2 HECH y Type an exact answer using as needed Use integers or...

Calculus
Q

Evaluate the integral and interpret it as the area of a region 2 1 14...

Calculus
Q

If angle A is 30 and side AB 100 m find the length of the...

Algebra
Q

Can somebody please help me Thank you. Income in the same amount as...

Accounting
Q

4. Which financial statement shows a company's financial position at a specific point in time?...

Accounting
Q

Goon Company uses the slowance method of accounting for uncollectible accounts. On May 3 the...

Accounting
Q

Lopez, an imaginative person, graduated a few years ago, and he is currently working in...

Finance