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What is the new share price for apple stock

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Reference no: EM132802842

This problem illustrates how an increase in interest rates, and thus an increase in the discount rate, can significantly affect stock prices.

  • Suppose that the current share price of Apple common stock is $172. The projected annual dividend for the upcoming year is $2.74 per share. This dividend is set by the board, and it is not expected to change. (Caution: this amount is NOT the most recent dividend, D0. It is the projected dividend in one year, D1.)
  • Analysts forecast the annual growth rate in dividends will be 9.2%; assume that this growth rate is not affected by interest rate changes.
  • Suppose that interest rates suddenly rise by 1.1%. Assume that Apple's discount rate rises by the same amount. (For example, if the current discount rate is 8% and interest rates rise by 2%, then the new discount rate will be 8% + 2% = 10%.)

Problem 1: What is the new share price for Apple stock?

Reference no: EM132802842

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