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Homework answers / question archive / The following are next three years' projected dividends for APL
The following are next three years' projected dividends for APL. Starting from 2019, dividends are expected to grow at 5% forever. If the capitalization rate is 14%, calculate P0.
D2018 = 2.52
D2018 = 3.23
D2019 = 3.94
Value after 2019=(Dividend for 2019*Growth rate)/(Capitalization rate-Growth rate)
=(3.94*1.05)/(0.14-0.05)
=45.967(Approx)
Hence P0=Future dividend and value*Present value of discounting factor(rate%,time period)
=2.52/1.14+3.23/1.14^2+3.94/1.14^3+45.967/1.14^3
=38.38(Approx)
