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Homework answers / question archive / Given the information in the table, what is the price of the stock in YEAR 1?  Today's Dividend                         $3

Given the information in the table, what is the price of the stock in YEAR 1?  Today's Dividend                         $3

Finance

Given the information in the table, what is the price of the stock in YEAR 1? 
Today's Dividend                         $3.60

Discount Rate                              8.38%

Growth rate in dividends 0 to 1     9.82%

Growth rate in dividends 1 to 2     6.23%

Growth rate in dividends 2 to 3      6.91%

Growth rate in dividends 3 onward   3.35% 
 

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Computation of the stock price in year 1 (P1):-

P1 = P0*(1+Growth rate in year 1)

= $83.22*(1+9.82%%)

= $91.39

Hence, the stock price in year 1 (P1) = $91.39

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