Estimate the current price of the companys shares

Reference no: EM132959471

You have just graduated from your master degree and after graduation you have been hired as a financial analyst in a highly prestigious listed company name Cornejo. Your first assignment is to estimate the stock price of the company. Your assistant gathered the following information for you:

The dividend per share (DPS) record of the company over the last 5 years is as follows:

Year Dividend per Share (DPS)

2015               7.80
2016                9.4
2017               10.85
2018                11.2
2019                11.7
2020                10

· Risk free rate is 3.5 percent
· Market risk premium is 5 percent
· Cornejo Co has an estimated beta below market beta over the past five years.
· The company's dividend growth rate is expected to remain constant for the foreseeable future.
Required:

(a) Extrapolate a past growth rate.

(b) Make valid assumption about the company beta and justify.

(d) State clearly any limitations and assumptions that you made in your calculations.

Reference no: EM132959471

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