Answer:
Stock price = $62.564
Explanation:
The Discounted Cash flow (DCF) Model; This is a technique used to value the worth of an asset. According to this model, the value of an asset is the sum of the present values of the future cash flows that would arise from the asset discounted at the required rate of return. Using this model,
PV of dividend in year 1 = 2× 1.2×(1.123^-1) = 2.1371
PV of dividend in year 2= (2× 1.2^2×(1.123^-2) =2.2836
PV of dividend in year 3 and beyond = D(1+g)/(r-g)
r-12.3% , g- 7%
=2× 1.2^2× 1.07/(0.123-0.07)=58.14339623
Total PV = 2.1371 +2.2836 + 58.1433= 62.56419695
Stock price = $62.564
