Gilmore, Inc., just paid a dividend of $3.30 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. Assume investors require a return of 9 percent on this stock. What is the current price? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) Current price $ What will the price be in six years and in thirteen years? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)

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Business

Marisol

24 July, 12:53

Gilmore, Inc., just paid a dividend of $3.30 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. Assume investors require a return of 9 percent on this stock. What is the current price? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) Current price $ What will the price be in six years and in thirteen years? (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)

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Alanna Bowers · Answer 1

current price=Dividend for next period / (Required return-Growth rate)

= (3.3*1.045) / (0.09-0.045) = $76.63 (Approx)

Price in 6 years=Current price (1+Growth rate) ^6

=$76.63 (1.045) ^6=$99.80 (Approx)

Price in 13 years=Current price (1+Growth rate) ^13

=$76.63 (1.045) ^13=$135.81 (Approx)