## [answered] ABC Company's has the following data: Current stock pr

ABC Company's has the following data:

Current stock price\$10?

Last dividend paid\$0.50?

Required rate of return = rs10%

Assume that dividend is expected to grow at a constant rate, g, in the future.

Assume that the company has strong financial conditions and it is classified with low risk.

Assume rs is expected to remain at 10%, after 5 years from now

Find the stock price for ABC Company??

strp-1: calculate value of &quot;g&quot; now:

current price

=

\$10

=

1-10g

=

0.5

=

g

= last dividend*(1+ growth)/(required return-growth)

.50*(1+g)/(.10-g)

.50+.5g

15g

0.033333333 or,

growth rate is...

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This question was answered on: Sep 18, 2020

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