00:01
So we give a scenario of a firm that intends to pay dividends as follows in the first, in the next year, in the coming year, it expects to pay $2 in dividends in the following year, $1 .50, and in the following year, it's actually $2 .50, and then $3 .50 in the following year.
00:26
Okay, so that's in terms of the dividends that this firm wants to pay.
00:33
And the other piece of information that is given is that growth is expected to level off at 8%.
00:41
So constant growth is expected to be at 8%.
00:51
And that the required percentage rate of return required.
01:02
Rate of the turn is given as 14%.
01:06
So the question is how much would you be willing to pay for the stock? so what is required is basically to engage a formula p, which is the price of the stock, is equal to d1, which basically is the value of next year's dividend.
01:25
So the dividend in year one, which we currently have here, the two rent.
01:30
And then the r which is going to be the constant cost of agri -capital, which is given here as 14%.
01:41
So that basically is the r minus the constant growth rate, which is given as 8 % in this regard...