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Me
Me.!lice Bearings, Inc., is a young riark. company. No dividends will be paid on the Nock over the next 7 years because the firm needs to plow back its earnings to fuel growth. The company will then pay a divide. of $19.25 per share 8 years from today a. will increa. the divide. by e percent per year thereafMr.
If the required return on this Nock is N percent, wh. is the current share price, (Do not round intermeOMte calculations and round your answer to 2 decimal places, e.g., 22.162
Expert Solution
Computation of Current Share Price:
Stock price for 7th year= Dividend at 8th year/ (Required rate- Growth rate)
= $14.25/ (14%- 6%)
= $14.25/8%
= $178.125
Current Share Price= Stock Price for 7th year/ (1+ Required rate of return)^7
= $178.125/ (1+ 14%)^7
= $178.125/ 2.5023
Current Share Price= $71.19
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