question archive Gojek is a young, innovative, Indonesian digital payment technology company
Gojek is a young, innovative, Indonesian digital payment technology company
Subject:FinancePrice:2.86 Bought8
Gojek is a young, innovative, Indonesian digital payment technology company. No dividends were paid on the stock over the 19 years because the firm needed to reinvest earnings to maintain growth. The company will begin to pay a dividend of $28 per share 20 years from today and will increase the dividend by 6% per year, thereafter. If the required rate of return on this stock is 13%, what is the current share price?
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Dividend in Year 20 = $28.00
Growth Rate = 6.00%
Required Return = 13.00%
Stock Price in Year 19 = Dividend in Year 20 / (Required Return - Growth Rate)
Stock Price in Year 19 = $28.00 / (0.13 - 0.06)
Stock Price in Year 19 = $28.00 / 0.07
Stock Price in Year 19 = $400.00
Current Stock Price = Stock Price in Year 19 / (1 + Required Return)^19
Current Stock Price = $400.00 / 1.13^19
Current Stock Price = $39.23
