Connolly cos expected year end dividend is d1 125 its...

Connolly Co.'s expected year-end dividend is D1 = $1.25, its required return is rs = 11.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the future. What is Connolly's expected stock price in 7 years, i.e., what is P7? Select the correct answer. a. $29.31 b. $28.93 c. $28.55 d. $28.17 e. $29.69

Transcript

00:01 Hello friends we need to write here connolly coho's expected year and end dividend is given its required return is given its dividend yield is given and growth rate is expected to be constant in future what is connolly stock price in seven years we need to write and what is the possible value of prices and stock we need to write here so let's start with our answering part first we need to calculate our price p not that can be referred at spino's a p not is basically equivalent to to d1 divided by dividend yield.

00:34 If i write here for this, this must be d1 divided by dividend yield.

00:43 So if i put the value, this will come out as 1 .6 divided by 1 .6 divided by 11%.

00:52 1 .6 divided by 11 and this is divided by 100, which is 160 divided by 11, this value will come out as if i calculate this this will be 26 .67 now what we need to write here in the next if i write here for this this must be this is if i write here for this price seven years from now should be price seven years from now years from now from now if i write here for this this is p 7 and 4th 1th before we need to calculate what is our growth rate so we all know growth rate is required written required written minus if i write here for this this is dividend dividend yield so basically if i write here for this this will come out as 11 % minus 11 % minus 6 % which will come out as 5 % now if i put all the value this will come out as p not multiplied by 1 plus r which is r is rate so basically this is equivalent to rate raise to power t which is 7 and if i write here for this if i calculate this this will come out as to 26 .67 multiplied by 1 plus 5 % means 0 .05 raise to power 7 and if i write here this is 26 .7 multiplied by 1 .05 raise to power 7 and if i calculate this this value will come out as dollars if i write here for this 37 .527 .27...

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