question archive Pharsalus Inc
Pharsalus Inc
Subject:FinancePrice:2.86 Bought9
Pharsalus Inc. just paid a dividend (i.e., D0) of $ 3.59 per share. This dividend is expected to grow at a rate of 8.4 percent per year forever. The appropriate discount rate for Pharsalus's stock is 12.3 percent. What is the price of the stock? (Round your answer to 2 decimal places and record your answer without dollar sign or commas). Your Answer: :] Answer
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Stock Price of Pharsalus Inc. is $99.78
Step-by-step explanation
Calculation of Stock Price by using Constant Growth Model :
Po = D1 / Ke - g
Where,
Po = Todays Stock Price
D0 = Dividend Paid = $3.59
g = Growth Rate = 8.4%
D1 = Expected dividend = D0+g = $3.59+8.4% = $3.89156
Ke = discount Rate = 12.3%
P0 = $3.89156 / 12.30% - 8.40%
P0 = $3.89156 / 3.90%
P0 = $99.78
Stock Price is $99.78
