Homework answers / question archive / Jim Ltd

Jim Ltd

Finance

Share With

---

Jim Ltd.'s next dividend will be $4, the dividend is expected to grow at 7% p.a., for the following 3 years. After that the growth rate in dividends will be 5% per year indefinitely. Required rate of return is 10% p.a.

 

Required:

Calculate the current value of Jim Ltd.'s shares.

 

Answer 7: [Answer here]

 

Year

Dividend Amount

1

    

2

   

3

   

4

   

 

Share Price: (Discounted present values)

Year

Dividend

Discount factor

Amount

1

   

   

   

2

   

   

   

3

   

   

   

 

Growth model value

-       

-        

3

   

   

   

Total

   

   

=                 

 

[Show workings here]