Columbus Incorporated just paid 43 per share dividend yester

Columbus Incorporated just paid $4.3 per share dividend yesterday (i.e.,D₀). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stock, r, is 11%. What is the value per share of the company\'s stock? Round your answer to two decimal places.

Solution

Recent Dividend, D0 = $4.30
Growth Rate, g = 6%
Required Return, rs = 11%

D1 = D0 * (1 + g)
D1 = $4.30 * 1.06
D1 = $4.558

Value per share = D1 / (rs - g)
Value per share = $4.558 / (0.11 - 0.06)
Value per share = $4.558 / 0.05
Value per share = $91.16