Mobray Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 7 percent per year indefinitely. The required return on this stock is 12 percent, and the stock currently sells for $88 per share. What is the projected dividend for the coming year? (i.e. Div 1)   in step 3 how did u get the 30.546

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
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Mobray Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 7 percent per year indefinitely. The required return on this stock is 12 percent, and the stock currently sells for $88 per share. What is the projected dividend for the coming year? (i.e. Div 1)

 

in step 3 how did u get the 30.546 

 

                   =Do (1.11607+1.24562+1.39020+1.42743+ 30.546) = 88=Do (35.72525) = 88=Do =88/ 35.72525=Do =2.46

 

Do = Base dividend
D1 = Do (1.25)
D2 = Do (1.25)?
D3 = Do (1.25)
D4 = Do (1.25) (1. 15)
D5 = Do (1.25) (1. 15) (1.07)
Step 3
Do(1.25) (1.15)
Do (1.25)
+
(1.12)
Do (1.25)
+
(1.12)
Do (1.25) (1.15) * 1.07
+
(0.12-0.07) (1.12)a
Do (1.25)
Stock price =
1.12
(1.12)4
=Do (1.11607+1.24562+1.39020+1.42743+ 30.546) = 88
=Do (35.72525) = 88
=Do =88/ 35.72525
=Do =2.46
Transcribed Image Text:Do = Base dividend D1 = Do (1.25) D2 = Do (1.25)? D3 = Do (1.25) D4 = Do (1.25) (1. 15) D5 = Do (1.25) (1. 15) (1.07) Step 3 Do(1.25) (1.15) Do (1.25) + (1.12) Do (1.25) + (1.12) Do (1.25) (1.15) * 1.07 + (0.12-0.07) (1.12)a Do (1.25) Stock price = 1.12 (1.12)4 =Do (1.11607+1.24562+1.39020+1.42743+ 30.546) = 88 =Do (35.72525) = 88 =Do =88/ 35.72525 =Do =2.46
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