Drake Electricity sells electricity throughout the Northwestern Province of Zambia. Because of increased mining activities in recent years, the company has prospered and expects to continue to do well in the near term. The company will pay a K0.75 per-share dividend to investors one year from now. Investors believe that Drake Electricity will increase that dividend at 15 percent per year for the subsequent five years, before settling down to a long-run dividend growth rate of 3 percent. Investors expect an 8 percent return on Drake Electricity common shares. What is the current selling price of the stock?

Drake Electricity sells electricity throughout the Northwestern Province of Zambia. Because of increased mining activities in recent years, the company has prospered and expects to continue to do well in the near term. The company will pay a K0.75 per-share dividend to investors one year from now. Investors believe that Drake Electricity will increase that dividend at 15 percent per year for the subsequent five years, before settling down to a long-run dividend growth rate of 3 percent. Investors expect an 8 percent return on Drake Electricity common shares. What is the current selling price of the stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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