Answer:
P0 = $94.36658 rounded off to $94.37
Explanation:
To calculate the value per share of Hallmark Inc. we will use the dividend discount model or DDM, DDM values the price of a stock based on the present value of the expected future dividends from the stock. The formula for price under DDM of this stock is,
P0 = D1 / (1+r) + D2 / (1+r)^2 + D3 / (1+r)^3 + D4 / (1+r)^4 +
[(D4 * (1+g)) / (r - g)] / (1+r)^4
Where,
- r is the required rate of return
- g is the constant growth rate
- P0 is price or value per share today
P0 = 2.1 / (1+0.07) + 2.65 / (1+0.07)^2 + 3.03 / (1+0.07)^3 +
3.22 / (1+0.07)^4 + [(3.22 * (1+0.04)) / (0.07 - 0.04)] / (1+0.07)^4
P0 = $94.36658 rounded off to $94.37
