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Dividend of $1.00 A Share (I.e., D $1.00) - The Dividend Is Expected To Grow at A Constant Rate of 6 Percent A Year

Harrison Clothiers' stock currently sells for $20 per share and pays a $1 dividend. The dividend is expected to grow 6% annually. Based on the constant growth model, the stock price is projected to be $21.20 in 1 year. The required rate of return, or cost of equity, is 11.3%.

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124 views1 page

Dividend of $1.00 A Share (I.e., D $1.00) - The Dividend Is Expected To Grow at A Constant Rate of 6 Percent A Year

Harrison Clothiers' stock currently sells for $20 per share and pays a $1 dividend. The dividend is expected to grow 6% annually. Based on the constant growth model, the stock price is projected to be $21.20 in 1 year. The required rate of return, or cost of equity, is 11.3%.

Uploaded by

Trang Henry
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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HARRISON CLOTHIERS stock currently sells for $20 a share. The stock just paid a dividend of $1.

00 a share (i.e., D0=$1.00). The dividend is expected to grow at a constant rate of 6 percent a year. WHAT STOCK PRICE IS EXPECTED 1 YEAR FROM NOW? WHAT IS THE REQUIRED RATE OF RETURN ON THE COMPANYS STOCK? P0 = $20 D0 = $1.00 g = 6%

P1 = ? ks

P1

= P0 ( 1 + g )

= $20 ( 1.06 )

= $21.20 ks = D1 +g P0 = $1.00 ( 1.06 ) + 0.06 $20

= 11.3%

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