Financial analyst forecast XYZ company's growth for the future to be constant 8%

Finance Jun 23, 2021

Financial analyst forecast XYZ company's growth for the future to be constant 8%. XYZ recent dividend was $0.88. What is the value of XYZ stock when the required return is 12%?

Expert Solution

Computation of Value of XYZ Stock:

Value of XYZ Stock = Next Year Dividend/(Required rate of Return - Growth Rate)

= 0.88*(1+8%)/(12%-8%)

= 0.9504/4%

Value of XYZ Stock = 23.76

So, Value of XYZ Stock is $23.76

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote