Homework Sourse6 Suppose ICanGrow Inc ICG pays a constant 8 dividend on its
6. Suppose ICanGrow, Inc. (ICG) pays a constant $8 dividend on its stock. The company will maintain this dividend for the next 12 years and will then cease paying dividends forever. If the require return on this stock is 10%, what is the current share price?
Solution
current share price = 54.51
| Discount rate | 10.0000% | ||
| Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
| - | 0 | - | - |
| 8.000 | 1 | 7.27 | 7.27 |
| 8.000 | 2 | 6.61 | 13.88 |
| 8.000 | 3 | 6.01 | 19.89 |
| 8.000 | 4 | 5.46 | 25.36 |
| 8.000 | 5 | 4.97 | 30.33 |
| 8.000 | 6 | 4.52 | 34.84 |
| 8.000 | 7 | 4.11 | 38.95 |
| 8.000 | 8 | 3.73 | 42.68 |
| 8.000 | 9 | 3.39 | 46.07 |
| 8.000 | 10 | 3.08 | 49.16 |
| 8.000 | 11 | 2.80 | 51.96 |
| 8.000 | 12 | 2.55 | 54.51 |
