Finance Ch.7 Problems

find current share price of equal dividends

Use dividend/(1+required rate)^year for EACH year OR Present value formula

Find current share price using dividend, growth rate, and required rate

current price = dividend / (required rate - growth rate)

Find required rate using dividend yield and growth rate

required rate = dividend yield + growth rate

Dividend yield

dividend / current price

Find growth rate using stock price, required rate, and dividend

growth rate = required rate - (dividend/ stock price)

current share price aka cash flow formula

dividend / (1 + required rate) ^ year

last year cash flow formula

next year dividend / (required rate - growth rate)

next year dividend formula

previous dividend * (1 + growth rate)

Find current share with different cash flows

Find cash flows for years w/ different dividends

find next year dividend

Find “dividend” of last year

Find cash flow of last year

Sum cash flows

Find required rate using dividend and current price

required rate = dividend / current price