Answer:
amount pay = 32.91
Explanation:
given data
grow at a rate g = 19% = 0.19
time = 5 year
expecting to grow Eg = 5 % = 0.05
paid a dividend D = $1.25
required rate of return Rg = 12%
solution
we get here amount that pay for company's stock is express as
amount = [tex]D \times \frac{1+g}{1+Rg} + D \times (\frac{1+g}{1+Rg})^2 + D \times (\frac{1+g}{1+Rg})^3 + D \times (\frac{1+g}{1+Rg})^4 + D \times (\frac{1+g}{1+Rg})^5 + D \times (\frac{1+g}{1+Rg})^5 \times \frac{1+Eg}{Rg-Eg} \ \ \ \ \ \ \ \ \ ..................................1[/tex]
put here value and we get
[tex]1.25 \times \frac{1+0.19}{1.12} + 1.25 \times (\frac{1+0.19}{1.12})^2 + 1.25 \times (\frac{1+0.19}{1.12})^3 + 1.25 \times (\frac{1+0.19}{1.12})^4 + 1.25 \times (\frac{1+0.19}{1.12})^5 + 1.25 \times (\frac{1+0.19}{1.12})^5 \times \frac{1+0.5}{0.12-0.05}[/tex]
solve it we get
amount pay = 32.91
