Investors require a return of 13 percent on the stock for the first three years, a return of 11 percent for the next three years, and then a return of 9 percent thereafter. What is the current share price for the stock

Complete Question:

BenchMark, Inc., just paid a dividend of $3.45 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 13 percent on the stock for the first three years, a return of 11 percent for the next three years, and then a return of 9 percent thereafter. What is the current share price for the stock.

BenchMark, Inc.

The current share price for the stock is:

$43.13

Explanation:

a) Data and Calculations:

Dividend per share = $3.45

Growth rate = 5%

Investors' required rate of return = 13%

Stock value = Dividend per share / (Required Rate of Return – Dividend Growth Rate)

= $3.45/(0.13 - 0.05)

= $43.13

b) We can calculate BenchMark's current share price, by dividing the dividend per share by the investors' required rate of return after subtracting the growth rate from the required rate of return.

answer; functional fixedness;

answer; only identify and interpret trends in the marketplace;