(Q. 17 IN B) THE DIVIDENDS OF XYZ CORP. ARE FORECASTED TO GROW AT...
19. (Q. 17 in B) The dividends of XYZ corp. are forecasted to grow at 20% per year for two years, after which the shares grow at a fixed rate of 6% forever. If the discount rate is 15% and a dividend of $2.50 was just paid, what should be the current share price? A) $31.16B) $33.23 C) $37.42 D) $47.77 Solution C
2
×× ×201(.502$)06=× +P0
−01500381660++ ×0
2
09 P0
= $37.42