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The ZZ Corporation has just paid a dividend of $3.5M. The expected growth of the company is 7.3% per year. The interest rate used for this type of corporation is 10.4%. Assume that there are 800,000 shares outstanding. What is the value of a share of stock in the ZZ Corporation? (Keep your answer to 2 decimal places, e.g. xx.12.)

Respuesta :

Answer:

price = $151.43

Step-by-step explanation:

Given data:

dividend = $3.5M

Growth percentage = 7.3% per year

Number of share is 800,000

Price for stock can be calculated as

[tex]price  = \frac{dividend \times (1+g)}{Ke-g}[/tex]

here,

Ke = 10.4%

g = 7.3%

dividend per share  [tex]= \frac{3.5M}{800,000} [/tex]= $4.375 PER SHARE

So we have

[tex]price  = \frac{4.375\times (1+0.073)}{0.104 - 0.073}[/tex]

[tex]price = \frac{4.375\times 1.073}{0.031}[/tex]

price = $151.43

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