Question 8 2 points Columbus Manufacturings stock curently s

Question 8 (2 points) Columbus Manufacturing\'s stock curently sells for $ 28.96 a thare. The stock just paid a dividend of $3.50 a share (i.e, Do). The dividend is expected to grow at a constant rate of6 % a year. What stock price is expected three year from now (P3)? Round your answer to two decimal places

Solution

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Q8 Ke= D1/p0+ g where D1 is dividend at the end of year = 3.5*1.06 3.71 P0 is price at the beginning                         28.96 g is growth rate 6.00% Ke= 3.71/28.96 + 6% Ke= 12.81% + 6% Ke=18.81% P3 = D4/(ke-g) P3 = 3.71*(1.06)^3/(18.81% - 6%) P3 = 4.4187/(12.81%) P3 = $34.49 Q9 ke =D1/P0+g ke = 2*1.06/25.72 + 6% ke = 8.24% + 6% ke = 14.24%