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A company has just paid a dividend of $0.23 per share.
shareholders are expecting the dividend to remain at $0.23 per share next year, but to increase at an average rate of 3% per annum thereafter.
shareholder required rate of return is 12%,and the rate of corporation tax is 25%.what will be the current market value per share (to the nearest cent)?
A) $2.71
B) $2.33
C) $2.63
D) $2.56(Pleas sir solve this calculation)
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Po = Do (1+g) / (re – g)
In fact, the Do(1+g) is the dividend in 1 years time which in this question is 0.23
Therefore Po = 0.23 / (0.12 – 0.03) = $2.56
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