XYZ, Inc. declared on January 1, 2015, that it will pay a cash dividend of $1.00 per share at the end of 2015. Analysts expect that DPS (dividends per share) will grow at a rate of 20% each year for 2016 and 2017, and at 4% a year thereafter. Dividends are paid annually. Shareholders’ required rate of return is 15% per year in 2016 and 2017, and 8% thereafter. What is the share price on January 1, 2015?

XYZ, Inc. declared on January 1, 2015, that it will pay a cash dividend of $1.00 per share at the end of 2015. Analysts expect that DPS (dividends per share) will grow at a rate of 20% each year for 2016 and 2017, and at 4% a year thereafter. Dividends are paid annually. Shareholders’ required rate of return is 15% per year in 2016 and 2017, and 8% thereafter. What is the share price on January 1, 2015?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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