Share price and Dividend Growth Example

Share price and Dividend Growth Example

Dividend paid = $ 6

Cost of equity = 12%

Dividend growth Rate= 5%

Calculate share price?

Solution

Share Price = Do (1+g)

                      Ke – g

g = Dividend growth Rate

Ke = Cost of Equity

Do =Current Dividend

= $ 6 (1+.05)

      12% - 5%

= 6.3

     7%

= $ 90 (Share Price)