The Dividend Growth Model Applied to Magna Vision

Top Dividend Stocks

Dividend Stock Investing Guide

Get Instant Access

MagnaVision has not yet begun to pay dividends. However, as we saw in Table 12-1, a cash dividend of $0.442 per share is forecasted for 2005. The dividend is expected to grow by about 2.5 percent in 2006, and then at a constant 5 percent rate thereafter. MagnaVision's cost of equity is 14 percent. In this situation, we can apply the noncon-stant dividend growth model as developed earlier in Chapter 5. Figure 12-3 shows that the value of MagnaVision's stock, based on this model, is $3.70 per share, which is the same as the value found using the corporate valuation model except for a rounding difference.

Was this article helpful?

0 0
Improving Your Financial IQ

Improving Your Financial IQ

Taking Control Of Your Finances In A Fun And Easy Way. 23 Pages, Letter-Sized, PDF Format, Instant Download. This book will be one of the most important financial books you will ever read. Discover the truth behind why most network marketers fail to make money or break even because of their lack of financial knowledge plus so much more.

Get My Free Ebook

Post a comment