Answer:
Dividend in year 2000 (Do) = $0.137
Dividend in year 2012 (D12) = $0.55
Required return (Ke) = 13.7% = 0.137
D12 = Do(1 + g)n
$0.55 = $0.137(1 + g)12
$0.55 = (1 + g)12
$0.137
4.0146 = (1 + g)12
12√4.0146 - 1 = g
1.1228 - 1 = g
g = 0.1228 = 12.28%
Po = Do(1 + g)
ke - g
Po = $0.55(1 + 0.1228)
0.137 - 0.1228
Po = $0.55(1.1228)
0.0142
Po = $43.49
Explanation:
In this case, we need to calculate the growth rate using the formula D12 = Do(1 + g)12. Then, we will calculate the current market price, which is a function of current dividend paid, subject to growth rate, divided by the excess of cost of equity over growth rate.
$43.49 is the value of this stock at the beginning of 2013 when the required return is 13.7 percent.
Dividend in year 2000 (Do) = $0.137
Dividend in year 2012 (D12) = $0.55
Required return (Ke) = 13.7% = 0.137
D12 = Do(1 + g)n
$0.55 = $0.137(1 + g)12
$0.55 = (1 + g)12 $0.137
4.0146 = (1 + g)12
12√4.0146 - 1 = g
1.1228 - 1 = g
g = 0.1228
g= 12.28%
Po = Do(1 + g)
ke - g Po = $0.55(1 + 0.1228)
0.137 - 0.1228 Po = $0.55(1.1228)
Po= 0.0142
Po = $43.49
The value of this stock at the beginning of 2013 when the required return is 13.7 percent is $43.49 .
To learn about calculation interest rate refer:https://brainly.com/question/19417091
#SPJ2
