Calculate Share price with Dividend Growth

Calculate Share price with Dividend Growth

Dividend paid = $ 8

Cost of equity = 8%

Dividend growth Rate= 2%

Calculate share price?

Solution

Share Price = Do (1+g)

                      Ke – g

g = Dividend growth Rate

Ke = Cost of Equity

Do =Current Dividend

= $ 8 (1+.02)

      8% - 2%

= 8.16

     6%

= $ 136 (Share Price)