Question

Tribeda corporation has just paid a dividend of RM1.20 per share.the dividend is expected to grow at 6% a year for the next 3 years, and then to grow at 8% a year thereafter.


If the required rate of return is 14%, compute the value of the share today.

Answer 1

If the required rate of return is 14%, then the value of the share today is:

$P = \frac{1.2\times1.06^3\times1.08}{0.14 - 0.08} = RM25.73.$