Dividends on CCN corporation are expected to grow at a 9% per year. Assume that the discount rate on CCN is 12% and that the expected dividend per share in one year is $0.50. CCN has just paid a dividend, so the next dividend is the $0.50 to be paid one year from now. Calculate the expected price per share 14 years from now. Assume that a dividend has just been paid.
Added by Crystal S.
Step 1
Since dividends are expected to grow at a rate of 9% per year, we can use the formula for the future value of a growing annuity to calculate this: D14 = D1 * (1 + g)^(14-1) where: D14 = expected dividend 14 years from now D1 = expected dividend 1 year from now = Show more…
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