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Thread: [HELP!] Finding stock price per share (Po)?

  1. #1

    Question [HELP!] Finding stock price per share (Po)?

    Hi guys i'm new here.
    I need help from the experts here to solve this problem:

    A Stock has paid dividend for $6/share and expecting to grow 15% per year for the next 20 years, and then it will be constant forever. Using rate of return 11% please calculate:
    a) Stock price per share today (Po)
    b) if the stock price were $90/share, how much dividend per share would be offered to the investors today?
    this is one of the numbers from my last exam. apparently my lecturer hadn't thought us well about this!

  2. #2
    Elite Member
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    Quote Originally Posted by Stratos View Post
    A Stock has paid dividend for $6/share and
    expecting to grow 15% per year for the next 20 years
    Can you calculate what $6 at 15% annually will
    accumulate to over 15 years?
    I'm just an imagination of your figment !

  3. #3
    Quote Originally Posted by Denis View Post
    Can you calculate what $6 at 15% annually will
    accumulate to over 15 years?
    using constant growth?
    Dt = D0 x (1+g)t
    = $6 x (1+0.15)15 = $7.50


  4. #4
    Quote Originally Posted by Denis View Post
    Can you calculate what $6 at 15% annually will
    accumulate to over 15 years?
    constant growth?

    $6 x (1.15)15
    $48.82

  5. #5
    Elite Member
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    Location
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    Correct! So you understand these.

    To answer your 1st question:
    do your calculation again, using n=20:
    that'll give ~98.20
    then "present value" above using 11%.

    Not sure about your 2nd question;
    seems like you would assume 90
    was result (instead of 98.20) and
    do calculations over again...
    I'm just an imagination of your figment !

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