Final answer:
To determine PG's share value using the dividend-discount model, projected dividend growth rates and equity cost of capital are key inputs. The present value of the dividends is calculated, and without the number of shares, the exact price per share can't be determined. The Babble Inc. example illustrates the process, but actual values for PG are needed to find the share price.
Step-by-step explanation:
To calculate the value per share for Procter and Gamble (PG) using the dividend-discount model, we need to consider the projected dividends growth rates and the equity cost of capital. For the first five years, the dividend is expected to grow at 8% per annum and then at 3% per annum from the sixth year onwards. The equity cost of capital for PG is given as 6% per annum.
The present value of the dividends for the first five years can be calculated using the formula for present value of a growing perpetuity when the growth rate changes. However, the information provided does not include the exact number of shares, which is essential to calculate the price per share. A simplified general formula would look like this: Present Value = Dividend / (Equity Cost of Capital - Growth Rate). Once this calculation is made for the dividends expected in the next five years and thereafter, these amounts are summed up to get the total present value (PV) of all future dividends.
Nonetheless, without the specific number of shares Procter and Gamble has, we cannot determine the exact price per share. The example provided for Babble Inc. shows that you would need to divide the present value of all future dividends by the number of shares to get the price per share. The process described in the Babble Inc. example would be similar for PG, but specific numbers are required to provide an actual value.