A company plans to issue a dividend next year (t = 1) for $3 per share, another dividend the year after (t = 2) for $4 per share, and another dividend after that ( t = 3) for $2 per share. The dividends are expected to increase at the constant growth rate of 5% after the third year. If shareholders require a return of 8%, what is this company's price per share today (t = 0)? $63.36

Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter7: Valuation Of Stocks And Corporations
Section: Chapter Questions
Problem 21P
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A company plans to issue a
dividend next year (t = 1) for $3
per share, another dividend the
year after (t = 2) for $4 per share,
and another dividend after that (
t = 3) for $2 per share. The
dividends are expected to
increase at the constant growth
rate of 5% after the third year. If
shareholders require a return of
8%, what is this company's price
per share today (t = 0)? $63.36
Transcribed Image Text:A company plans to issue a dividend next year (t = 1) for $3 per share, another dividend the year after (t = 2) for $4 per share, and another dividend after that ( t = 3) for $2 per share. The dividends are expected to increase at the constant growth rate of 5% after the third year. If shareholders require a return of 8%, what is this company's price per share today (t = 0)? $63.36
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