The forecasted dividend per share in 2019 (it is 2011 in the case) is $1.21. If...

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The forecasted dividend per share in 2019 (it is 2011 in thecase) is $1.21. If the dividend per share is expected to grow by 6%each year over the period 2020 to 2024, and stabilizes to 3% eachyear forever, determine the following:
B) the true price of the stock.
Based on CAPM-Cost of equity = 7.01%

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4.3 Ratings (793 Votes)

Discount rate	7.0100%
3.24	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
-	0	-	-
1.210	1	1.13	1.13
1.283	2	1.12	2.251
1.360	3	1.11	3.360
1.441	4	1.10	4.46
1.528	5	1.09	5.55
1.619	6	1.08	6.63
41.592	6	27.70	34.33
terminal value = 1.619*1.03/(0.071 - 0.03) = 41.592; price = 34.33

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The forecasted dividend per share in 2019 (it is 2011 in thecase) is $1.21. If the dividend per share is expected to grow by 6%each year over the period 2020 to 2024, and stabilizes to 3% eachyear forever, determine the following:B) the true price of the stock.Based on CAPM-Cost of equity = 7.01%