Computation of growth rate and value per share

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Reference no: EM1314305

The chairman of Heller Industries told a meeting of financial analysts that he expects the firm's earnings and dividends to double over the next six years. The firm's current (that is, as of year 0) earnings and dividends per share are $4 and $2, respectively.

a. Estimate the compound annual dividend growth rate over the six-year period.

b. Assuming the forecasted growth rate in (a) will go on forever, how much is this stock worth today if investors require an 18% rate of return?

Reference no: EM1314305

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