Answers
a. Current Stock Price = Expected Dividend / ( required Rate of Return - growth rate)
= ( $ 2.50 * 107%) / ( 12% -7%)
= $ 53.50
Hence the correct answer is $ 53.50
b. Price in 5 Years = Current Price * (1+ Growth Rate ) ^ 5
= $ 53.50 * ( 1+7/100) ^ 5
= $ 75.04
Hence the correct answer is $ 75.04
c.
Price in 20 Years = Current Price * (1+ Growth Rate ) ^20
= $ 53.50 * ( 1+7/100) ^ 20
= $ 207.03
Hence the correct answer is $ 207.03
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