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What should the market value of the share be

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Reference no: EM132979300

Problem - Constant growth: Kathleen Ferrero is interested in purchasing the ordinary shares of Vespertine Pty Ltd which are currently priced at $39.96. The company expects to pay a dividend of $2.58 next year and expects to grow at a constant rate of 8 per cent.

a. What should the market value of the share be if the required rate of return is 14 per cent?

b. Is this a good buy? Why or why not?

Reference no: EM132979300

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