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A company recently paid a dividend of $0.50 a share. This is $0.10 more than 3 years ago. Shareholders have a required rate return of 10%.
Using the dividend valuation model and assuming recent dividend growth is expected to continue, what is the current value of share?
A. $ 23.41
B. $ 5
C. $38.48
D. $10.48You use the dividend growth formula that it the first formula on the formula sheet.
Do = 50c; Re = 10%.
For g, since the dividend 3 years ago was 40c, the growth rate = g =
(cubed root of 50/40) – 1Have you watched the free lectures on the valuation of securities?
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