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Calculate the price of the share at the end of year

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Question - Aspen Australia Pty Ltd is a fast-growing drug company. The company forecasts that in the next 3 years its growth rates will be 30 per cent, 28 per cent and 24 per cent, respectively. Last week it declared a dividend of $1.67. After 3 years, the company expects a more stable growth rate of 8 per cent for the next several years. The required rate of return is 14 per cent.

Required -

a. Calculate the dividends for the next 3 years, and find its present value.

b. Calculate the price of the share at the end of year 3, when the company settles to a constant growth rate.

c. What is the current price of the share?

Reference no: EM132936439

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