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    Price of a Share

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    Whizzkid, Inc, is experiencing a period of rapid growth. Earnings per share is expected to grow at a rate of 15 percent during the next two years, 13 percent in the third year, 10 percent in the fourth year, and at a constant rate of 6 percent thereafter. The firm just provided $5.00 EPS for the last year. If the required rate of return on the stock is 17 percent, what is the price of a share of the stock today?

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    Solution Preview

    You have not mentioned the Dividend amount. I assume the dividend for the last year D0= $5.00
    The stock price is the discounted value of all the dividends to be received in subsequent years

    Year growth Dividend
    0 $5.00 ...

    Solution Summary

    The solution calculates price of a share.