Final Answer:
Ewert Enterprises' expected stock price 3 years from today is approximately $35.76 per share.
Step-by-step explanation:
Ewert Enterprises' expected stock price can be determined using the Gordon Growth Model, which calculates the present value of future dividends. The formula is:
[ P_t = frac{D_0 times (1 + g)^t}{r_s - g} ]
Where:
- ( P_t ) is the expected stock price at time ( t ),
- ( D_0 ) is the current dividend per share,
- ( g ) is the constant growth rate of dividends, and
- ( r_s ) is the required rate of return.
In this case, ( D_0 ) is the current dividend,( r_s ) is the required rate of return, and ( g ) is the growth rate of dividends. Substituting the given values:
[ P_t = frac{$30.50 times (1 + 0.062)^3}{0.100 - 0.062} ]
After calculating, ( P_t ) is approximately $35.76. Therefore, Ewert Enterprises' expected stock price 3 years from today is $35.76 per share.
This result suggests that, based on the projected constant growth rate of dividends, investors can anticipate a positive return on their investment. The Gordon Growth Model assumes a stable growth rate, making it suitable for companies with consistent dividend growth. However, it's crucial to note that the actual stock price may be influenced by various factors, and investors should consider a comprehensive analysis before making investment decisions.