What should be the current share price of headland

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Reference no: EM132591965

HEADLAND Ltd. had earnings per share of $5 as at December 31, 2015, but paid no dividends. Earnings were expected to grow at 15.5 percent per year for the following five years. HEADLAND Ltd. will start paying dividends for the first time on December 31, 2020, distributing 50 percent of its earnings to shareholders. Earnings growth will be 6 percent per year for the next six years (that is, from January 1, 2021 through to December 31, 2026). Starting on December 31, 2026, HEADLAND Ltd. will begin to pay out 80 percent of its earnings in dividends and earnings growth will stabilize at 2 percent per year in perpetuity.The required rate of return on HEADLAND stock is 10 percent.

Question 1: What should be the current share price of HEADLAND? (Round intermediate calculations to 6 decimal places, e.g. 15.612125 and the final answer to 2 decimal places, e.g. 15.61.)

Reference no: EM132591965

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