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If you are told that an initial dividend will be paid and then for the next 5 years there be an increase and a required return; how do you find value of the share today?
- Initial Dividend + Increase
1 + Required Return ^ each year
How do you get your coupon payment?
COUPON RATE X PAR VALUE
After you get your P0, they ask for the future price in 3 years... You find that how? Will you use your dividend payment? Which rate do you use?
If you are told that a dividend will only be paid for the next X years with a certain required return, how would you find the current share price?
- CO1 = dividend
- F01 = x years
- I = required return
- NPV = CPT
What would you like to do?
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