Homework Help is Here – Start Your Trial Now!
Business
Finance
Question 4: The last dividend paid by ABC company is 5 TL. The dividend is expected to grow next years by 49%, 6%, 3% 4% and 2% in the following years. If the expected return rate of investors (k) is 10%. a) what is the value of this stock today (PO)? b) What will the stock price be 10 years from today?

Question 4: The last dividend paid by ABC company is 5 TL. The dividend is expected to grow next years by 49%, 6%, 3% 4% and 2% in the following years. If the expected return rate of investors (k) is 10%. a) what is the value of this stock today (PO)? b) What will the stock price be 10 years from today?

Essentials Of Investments
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
See similar textbooks
icon
Related questions
Question
Question 4: The last dividend paid by ABC company is 5 TL. The dividend is expected to grow next years by 49%, 6%, 3% 4% and 2% in the following years. If the expected return rate of investors (k) is 10%. a) what is the value of this stock today (PO)? b) What will the stock price be 10 years from today?
Transcribed Image Text:Question 4: The last dividend paid by ABC company is 5 TL. The dividend is expected to grow next years by 49%, 6%, 3% 4% and 2% in the following years. If the expected return rate of investors (k) is 10%. a) what is the value of this stock today (PO)? b) What will the stock price be 10 years from today?
Expert Solution
Step 1

The dividend growth model is the valuation model that calculates the fair value of the stock on the assumption that the dividend grows at a stable rate in perpetuity or at different rates during the period.

Step 2

Dividend Growth Model Formula:

Price(P0)=DividendRe-g

 

Step 3

Computation of dividend:

D1=5 TL×(1+4%)=5.2 TLD2=5.2TL×(1+6%)=5.512 TLD3=5.512TL×(1+3%)=5.67 TLD4=5.67×(1+4%)=5.89 TLD5=5.89×(1+2%)=6 TL

 

 

steps

Step by step

Solved in 5 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS