Time value of money-renewable energy stock to your portfolio

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Reference no: EM131960319

Time value of money. Use excel, show process

You are deciding whether to add a renewable energy stock to your portfolio, and have read a couple of reports on the company. You're trying to do your own calculations. You are concerned about projections for the company's growth rate. The company's cost of equity capital (the discount rate for its equity) is known to be 10%. The company just paid a dividend of $2 per share. When calculating the value of the stock today, you cannot decide if the constant growth rate will be 4% or 5%. By how much does this seemingly small difference impact your valuation, i.e., the price per share?

Hint: Using the growing perpetuity formula, the DIV or C will be NEXT year's payment.

Reference no: EM131960319

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