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    Aqib Ali
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    The document contains a student's work for a business finance problem. The student was asked to calculate the stock price of Lash Inc. given that the stock just paid a $1 dividend, has a long-term growth rate of 5.4%, and investors require an 11.4% rate of return. The student uses the dividend growth model formula to calculate that the stock price is $17.56.

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    The document contains a student's work for a business finance problem. The student was asked to calculate the stock price of Lash Inc. given that the stock just paid a $1 dividend, has a long-term growth rate of 5.4%, and investors require an 11.4% rate of return. The student uses the dividend growth model formula to calculate that the stock price is $17.56.

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    © All Rights Reserved
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    12 views1 page

    Business Finance cp3

    Uploaded by

    Aqib Ali
    The document contains a student's work for a business finance problem. The student was asked to calculate the stock price of Lash Inc. given that the stock just paid a $1 dividend, has a long-term growth rate of 5.4%, and investors require an 11.4% rate of return. The student uses the dividend growth model formula to calculate that the stock price is $17.56.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 1

    Business Finance I

    Name Aqib

    Ali

    Roll

    No:18236048

    CP 3

    A share of Lash Inc.'s common stock just paid a dividend of $1.00. If the expected long-run growth rate
    for this stock is 5.4%, and if investors' required rate of return is 11.4%, what is the stock price?

    Answer:
    D1=D0(1+g)
    D1=1(1+5.4/100)
    D1=1.054

    P0=D1/(rs-gc)

    P0=1.054/(11.4%-5.4%)
    P0=1.054/(0.114-0.054)
    P0=1.054/(0.06)
    P0=$17.56

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