Question

E - 1.22

Stock price29.00
Required return 11.50
Growth rate 7.00
P0 = D1/(rS - g), so D1 = P0(rS - g) = 1.3050
Last dividend = D0 = D1/(1 + g)1.22
What is the value of D0?

Answer 1

The value of D0 is approximately 1.14

Step-by-step explanation:

The value of D0 can be calculated using the formula D1 = P0(rS - g) and the information given. In this case, D1 = 1.22. We can substitute the value of D1 into the formula to find the value of P0, which is the last dividend (D0). So, D0 = D1/(1 + g) = 1.22/(1 + 0.07) = 1.22/1.07 ≈ 1.14.