Chain Reaction SA, has been growing at a phenomenal rate of 30% per year because of its rapid expansion and explosive sales. You believe that this growth rate will last for three more years and that the rate will than drop to 10% per year. Total dividends just paid were 5 million euros, and the required return is 20%. If the growth rate than remains at 10% indefinitely, what is the current share price?
Chain Reaction SA, has been growing at a phenomenal rate of 30% per year because of its rapid expansion and explosive sales. You believe that this growth rate will last for three more years and that the rate will than drop to 10% per year. Total dividends just paid were 5 million euros, and the required return is 20%. If the growth rate than remains at 10% indefinitely, what is the current share price?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Chain Reaction SA, has been growing at a
phenomenal rate of 30% per year because
of its rapid
expansion and explosive sales. You
believe that this growth rate will last for
three more years and
that the rate will than drop to 10% per
year. Total dividends just paid were 5
million euros, and
the required return is 20%. If the growth
rate than remains at 10% indefinitely, what
is the current
share price?
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