Sheridan Pharma is a fast-growing drug company. Management forecasts that in the next three years, the company's dividend growth rates will be 30 percent, 28 percent, and 24 percent, respectively. Last week it paida dividend of $1.60. After three years, management expects dividend growth to stabilize at a rate of 8 percent. The required rate of return is 13.50 percent.
Sheridan Pharma is a fast-growing drug company. Management forecasts that in the next three years, the company's dividend growth rates will be 30 percent, 28 percent, and 24 percent, respectively. Last week it paida dividend of $1.60. After three years, management expects dividend growth to stabilize at a rate of 8 percent. The required rate of return is 13.50 percent.
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
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Sheridan Pharma is a fast-growing drug company. Management forecasts that in the next three years, the company's dividend
growth rates will be 30 percent, 28 percent, and 24 percent, respectively. Last week it paid a dividend of $1.60. After three years,
management expects dividend growth to stabilize at a rate of 8 percent. The required rate of return is 13.50 percent.
(a)
2 Your answer is partially correct.
Compute the dividends for each of the next three years, and calculate their present value. (Round dividends to 3 decimal
places, e.g. 15.250. Round present value of dividends to 2 decimal places, e.g. 15.20.)
D1
2$
2.080
D2
24
2.662
D3
2$
3.301
Present value
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