Share price with Growth Example

Share price with Growth Example

Dividend paid = $ 4

Cost of equity = 15%

Dividend growth Rate= 6%

Calculate share price?

Solution

Share Price = Do (1+g)

                      Ke – g

g = Dividend growth Rate

Ke = Cost of Equity

Do =Current Dividend

= $ 4 (1+.06)

      15% - 6%

= 4.24

     9%

= $ 4711 (Share Price)