Big J stock just paid a dividend of 150 Its dividend is grow

Big J stock just paid a dividend of 1.50. It’s dividend is growing at 6.00% per year, and the market discount rate for stocks of this risk is 11.50%. What is the value of Big J stock?

answer: 28.91

how to get this answer with financial calculator?

Solution

Given Values

Current Dividend = 1.5

Growth rate = 6% or 0.06

Growth factor = 1+0.06 = 1.06

Market discount rate = 11.50% or 0.115

Formula for calculation of price = Dividend * growth factor /(discount rate – growth rate)

The inputs in finance calculator are

1.50 * 1.06 / (0.115 -0.06)   = 28.90909 (output given by calculator)