D Question 20 5 pts Morgan Companys last dividend Do was 200

D Question 20 5 pts Morgan Company\'s last dividend (Do was $2.00. Its dividend growth rate is expected to be constant at 24% for 2 years, after which dividends are expected to grow at a rate of 6% forever. If the company\'s required return is 12%, what is your estimate of its current stock price? Your answer should be between 18.40 and 78.16, rounded to 2 decimal places, with no special characters

Solution

Share price is 47.98

Workings:

Dividends from year 1 to year 3 are:

Share price at the end of year 2 = 3.25971/ (12%-6%) = 54.3285

Year end	Cash flow	Amount	Present value factor @12%	Present value
		a	b	c= a*b
1	Dividend	$                        2.4800	0.892857143	$        2.2143
2	Dividend	$                        3.0752	0.797193878	$        2.4515
2	Share price at the beginning of year 3	$                        54.329	0.797193878	$      43.3104
	Share price today			$      47.9762