Post a New Question

Finance

posted by .

Company Q has just paid a dividend of $1.40 per share. Its dividend is expected to grow at 5% per year perpetually. If the required return is 10%, what is the value of a share in Company Q?

What I know:
Current Div=1.40
Required rate of return=10%
Retention Ratio=90% ?
Growth rate=5%
I think this formula??
DIV/r-g

  • Finance -

    Finance not my thing but--
    If we are talking about forever, then all that matters is the value of the flow of dividends and your discount rate or required rate of return.

    Vo = 1.40 + 1.40 (1.05/1.1) + 1.40 (1.05/1.1)^2 .... geometric series
    g = 1.4
    r = 1.05/1.1 = .954545...
    sum of infinite geometric series = g/(1-r)
    =1.4/ .0454545...
    =30.8

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Finance

    Company Q has just paid a dividend of $1.40 per share. Its dividend is expected to grow at 5% per year perpetually. If the required return is 10%, what is the value of a share in company Q?
  2. Finance

    Company Q has just paid a dividend of $1.40 per share. Its dividend is expected to grow at 5% per year perpetually. If the required return is 10%, what is the value of a share in company Q?
  3. Finance questions

    1) growth rates The stock price of the company is $76 investors require a 14% rate of return on similar stocks If the company plans to pay a dividend of $5.00 next year the expected growth rate of the company's stock price is ______ …
  4. Finance. PLEASE HELP ME

    1) growth rates The stock price of the company is $76 investors require a 14% rate of return on similar stocks If the company plans to pay a dividend of $5.00 next year the expected growth rate of the company's stock price is ______ …
  5. Finance

    Kilsheimer Company just paid a dividend of $ 4 per share. Future dividends are expected to grow at a constant rate of 6% per year. What is the value of the stock if the required return is 12 %?
  6. business finance

    Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividend of $11.25 per share and has announced that it will increase the dividend by $9.25 per share for each of the next four years, and then never pay another …
  7. Principles of Finance

    Kilsheimer Company just paid a dividend of $ 4 per share. Future dividends are expected to grow at a constant rate of 6% per year. What is the value of the stock if the required return is 12 %?
  8. Finance

    The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.25, the market risk premium is 5.00%, and the risk-free rate …
  9. Finance

    Hetfield and Ulrich, Inc., has an odd dividend policy. The company has just paid a dividend of $7 per share and has announced that it will increase the dividend by $5 per share for each of the next 4 years, and then never pay another …
  10. finance

    3.The Lo Company earned $2.60 per share and paid a dividend of $1.30 per share in the year that just ended. Earning and dividend per share are expected to grow at a rate of 5% per year in the future. Determine the value of the stock:

More Similar Questions

Post a New Question