Solving for Po

cnichols33 · #1 May 19, 2007, 08:02 PM

Company T will pay a dividend of $1.50 per share in the next 12 months (D1). The required rate of return (Ke) is 10% and the constant growth rate is 5 percent.

Is the correct formula and have I plugged everything in correctly??

Po = D1/Ke - g

= 1.50/10% - 5% = 30

bunnyKutty · May 19, 2007, 08:08 PM

Yes You Have Done That Correctly.

cnichols33 · May 19, 2007, 08:33 PM

Quote:

Originally Posted by cnichols33

Company T will pay a dividend of $1.50 per share in the next 12 months (D1). The required rate of return (Ke) is 10% and the constant growth rate is 5 percent.

Is the correct formula and have I plugged everything in correctly??

Po = D1/Ke - g

= 1.50/10% - 5% = 30

Thanks So much bunnyKutty.. You really know your stuff.. Wish I did.. your help is appreciated!!!!

Kindest Regards, and I look forward to reading more of your answers.. I feel confident now.. Thanks..

bunnyKutty · May 19, 2007, 08:37 PM

You are most welcome. Prepare well for the exams and I will help you as much as I can.



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