4) What is the value of a share that has just paid a dividend of $1, growing at 5% and a required rate of return of 10%? 5

Finance Dec 24, 2020

4) What is the value of a share that has just paid a dividend of $1, growing at 5% and a required rate of return of 10%? 5. What is the value of the share in Q4 in 3 years' time?

Expert Solution

Value of share = Dividend 0 * (1+Growth Rate) / (Required Rate - Growth Rate)

= 1 * (1+0.05) / (0.10 - 0.05)

= 1.05 / 0.05

= 21

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