2. Consider a share that is expected to pay a growing dividend every year. The first dividend div₁ =£5 is due in one year. The annual growth rate during the first 3 years is g=3%, after that the dividend will grow at g=1% forever. The annual discount rate is r=4%. What is the share price today (Lecture 3)?

Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter7: Valuation Of Stocks And Corporations
Section7.6: Valuing Nonconstant Growth Stocks
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2. Consider a share that is expected to pay a growing dividend every year. The first dividend
div₁ =£5 is due in one year. The annual growth rate during the first 3 years is g=3%, after
that the dividend will grow at g=1% forever. The annual discount rate is r=4%. What is the
share price today (Lecture 3)?
Transcribed Image Text:2. Consider a share that is expected to pay a growing dividend every year. The first dividend div₁ =£5 is due in one year. The annual growth rate during the first 3 years is g=3%, after that the dividend will grow at g=1% forever. The annual discount rate is r=4%. What is the share price today (Lecture 3)?
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