Explore BrainMass
Share

Explore BrainMass

    Stock Price Valuation: ABC Company

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    ABC Company has the following data:

    Current stock price = $10
    Last Dividend paid = $0.5
    Required rate of return = 10 %

    Assume that dividend is expected to grow at a constant rate, g, in the future.
    Assume that the company has a strong financial conditions and it is classified with low risk.
    Assume rs is expected to remain at 10%, after 5 years from now.

    Find the stock price for ABC Company?

    © BrainMass Inc. brainmass.com October 10, 2019, 12:42 am ad1c9bdddf
    https://brainmass.com/economics/finance/stock-price-valuation-abc-company-302561

    Solution Preview

    First we need to determine the growth rate:
    10 = .5(1+g)/(.1-g)
    => 1 - 10g = .5 + 0.5g
    => 10.5g = 0.5
    => g = 4.76%

    Now in order to ...

    Solution Summary

    The solution goes into a great amount of detail related to the stock price valuation question being asked. The solution is very easy to follow along and can be easily understood by anyone with a basic understanding of the concepts. The solution answers all the question(s) being asked in a succinct way. Overall, an excellent response.

    $2.19