Respuesta :
Answer:
$73.47
Explanation:
2.87 is the current dividend paid (D0)
Use that to find dividends for the next 5 years;
D1 = D0(1+g) ; g being the growth rate
D1 = 2.87(1.08) = 3.0996
D2 = 3.0996(1.08) = 3.3476
D3 =3.3476(1.08) = 3.6154
D4 = 3.6154(1.08) = 3.9046
D5 = 3.9046(1.08) = 4.2170
Next, find terminal cashflows;
D6 (yr 2024) = 4.2170 (1.03) = 4.3435
Find Present values of all the dividends using the 8% discount rate with the formula; PV = FV/[tex](1+r)^{n}[/tex]
PV(D1) = 2.87
PV(D2) = 2.87
PV(D3) = 2.87
PV(D4)= 2.87
PV(D5)= 2.87
PV of terminal value; PV(D6 onwards) = [tex]\frac{\frac{4.3435}{(0.08-0.03)} }{1.08^{5} }[/tex] = 59.1223
Sum up the PVs to find value per share;
$2.87 +$2.87 +$2.87 +$2.87 +$2.87+ $59.1223 = $73.47
Answer:
(PG) value per share at the end of 2018 is [tex]$\$ 73.47$[/tex].
Explanation:
Procter & Gamble provides branded commodities and helps of superior quality and value that enhance the lives of the world's buyers now and in the future.
(PG) paid an annual dividend [tex]= $\$2.87$[/tex]
Dividends increased by [tex]= $8.0 \%$[/tex]
In 2023 dividends increased by [tex]=$3.0 \%$[/tex] per year
Appropriate equity cost of capital for Procter and Gamble [tex]= $8.0 \%$[/tex] per year
Value per share at the end of 2018[tex]=?[/tex]
Step 1:
As per the dividend discount model, the share price will be equal to the present value of future dividends.
Dividend at the end of [tex]$2019=2.87^{*}(1+8 \%)$[/tex]
Dividend at end of [tex]$2020=2.87^{*}(1+8 \%)^2[/tex]
Dividend at end of [tex]$2021=2.87^{*}(1+8 \%)^3$[/tex]
Dividend at end of [tex]$2022=2.87^{*}(1+8 \%)^4$[/tex]
Dividend at end of [tex]$2023=2.87^{*}(1+8 \%)^5[/tex]
Hence share price at the end of 2018 =
[tex]$\frac{2.87 \times(1+8 \%)}{1.08}+\frac{2.87 \times(1+8 \%)^{2}}{1.08^{2}}+\frac{2.87(1+8 \%)^{3}}{1.08^{3}}+\frac{2.87 \times(1+8 \%)^{4}}{1.08^{4}}+$[/tex]
[tex]$\frac{2.87 \times(1+8 \%)^{5}}{1.08^{5}}+\frac{2.87 \times(1+8 \%)^{5} \times(1+3 \%)}{(8 \%-3 \%) \times(1.08)^{5}}$[/tex]
[tex]$=2.87+2.87+2.87+2.87+2.87+59.122$[/tex]
[tex]$=\$ 73.47$[/tex]
Thus we can say (PG) value per share at the end of 2018 is [tex]$\$ 73.47$[/tex]
To learn more about Procter and Gamble, refer:;
- https://brainly.com/question/15731201
- https://brainly.com/question/16046667
