question archive EQUITY MARKETS & FINANCING The following questions all relate to the valuation of the Online Shopping Guru Co
EQUITY MARKETS & FINANCING The following questions all relate to the valuation of the Online Shopping Guru Co
Subject:FinancePrice:2.86 Bought3
EQUITY MARKETS & FINANCING The following questions all relate to the valuation of the Online Shopping Guru Co. a. Online Shopping Guru Co. has a dividend payout policy of 50% and 100 million shares outstanding. Online Shopping Guru Co. book value per share stood at $10. It has just now paid a dividend of $2.83 per share (DO); the dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 16%, what is the current value of the stock?
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Price = dividend (1+ growth rate) / required rate - growth rate
= 2.83 (1+0.06) / 0.16 - 0.06
= 2.83 (1.06) / 0.10
= 2.9998 / 0.10
= $29.99 or 30
