Question #111581
A has just announced a dividend of 16p. Investors expect its dividend to grow in the future at a rate of 6% and they require a rate of return of 15% from their shares. What is the company's current cum-div share price?
1
Expert's answer
2020-04-23T11:52:41-0400

Current cum-div share price is:

P0 = Current dividend + Ex-dividend share price = 16+16∗(1+0.06)0.15−0.06=204.44.16 + 16*\frac{(1 + 0.06)}{0.15 - 0.06} = 204.44.


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