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Hi John,
If you get the chance, could you please help on the following question.
A company has just paid a dividend of $0.23 per share
Shareholders 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 12%, and corp tax 25%What will be the current market value per share?
Apologies if it’s already been posted
Aaron
Hi Aaron,
Using the growth model P=(div x (1+g))/r-g :
and as there is no growth expected next year:
P = 0.23 / (0.12-0.03) = 2.56Corp tax is irrelevant here
Hope this helps!
Gosia
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