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Grant, Inc., is a fast growth stock and expects to grow at a rate of 25 percent for the next four years. It will then settle to a constant-growth rate of 10 percent. The first dividend will be paid out in year 3 and will be equal to $5.00. If the required rate of return is 18 percent, what is the current price of the stoc

Respuesta :

Answer:

the current price of the stock is $50.59

Explanation:

The computation of the current price of the stock is shown below:

= $5.00 ÷ (1 + 18%)^3 + ($5.00 × (1 + 25%)) ÷ (1 + 18%)^4 + (($5.00 × (1 + 25%) × (1 + 10%)) ÷ (18% - 10%)) ÷ (1 + 18%)^4

= $50.59

Hence, the current price of the stock is $50.59

The same is to be considered by taking all the things given in the question

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