Nash Ltd

Finance Feb 23, 2021

Nash Ltd. just paid a dividend of $1.80 per share, which is expected to grow at a constant rate of 5.0 percent indefinitely. The T-bill rate is 2.7 percent and the risk premium of Nash Ltd. is 6.2 percent. Calculate Nash's current share price.

Expert Solution

Computation of Nash's Current Share Price:

Cost of Equity = Risk-free Rate + Risk Premium

= 2.7% + 6.2%

Cost of Equity = 8.9%

Current Share Price = D0 * (1+g) / (ke - g)

Here,

Dividend (D0) = $1.80

growth rate (g) = 5%

Cost of Equity (Ke) = 8.9%

Current Share Price = $1.80 * 1.05 / (0.089 - 0.05)

= $48.46154 or

= $48.46

So, Nash's Current Share Price is $48.46

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