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Finance

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Thirsty Cactus Corp. just paid a dividend of $1.25 per share. The dividends are expected to grow at 28 percent for the next eight years and then level off to a 6 percent growth rate indefinitely. If the required return is 13 percent, what is the price of the stock today? (Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16))

  • Finance - ,

    Christina, Erika, Rusty, Delaney, Samy -- several similar questions from the same person -- without any attempt at posting what you don't understand -- is a big turnoff for Jiskha tutors. We expect students to make an effort be and be explicit about what they don't understand.

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  • Finance - ,

    1) N=8 / I%=28 / PV=1.25 therefore FV = 9.008

    2) 9.008 x 1.06 = 9.54848

    3) 9.54848 / (.13-.06) = 136.41

    4) N=8 / I%=13 / FV= 136.41 therefore PV = 51.31

  • Finance - ,

    5) PV of Growing Annuity (From t=0 to infinity) = 18.25

    6) 51.31 + 18.25 = 69.56

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