Constant Dividend Growth Valuation Boehm Incorporated is expected to pay a $3

Finance Sep 21, 2020

Constant Dividend Growth Valuation

Boehm Incorporated is expected to pay a $3.10 per share dividend at the end of this year (i.e., D1 = $3.10). The dividend is expected to grow at a constant rate of 7% a year. The required rate of return on the stock, rs, is 17%. What is the estimated value per share of Boehm's stock? Do not round intermediate calculations. Round your answer to the nearest cent.

Expert Solution

P0 = D1 / (Required rate of return / Growth rate)

P0 = $3.10 / (17% - 7%)

P0 = $3.10 / 10%

P0 = $31

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