The Price of DDS Corporation Stock Is Expected to Be

question 89

Essay

The price of DDS Corporation stock is expected to be $45 in 5 years.Dividends are anticipated to increase at an annual rate of 10 percent from the most recent dividend of $1.00.If your required rate of return is 15 percent,how much are you willing to pay for DDS stock?

---

Definitions:

Consolidated Net Income

The combined net income of a parent company and its subsidiaries, factoring in the effects of intercompany transactions.

Equity Method

An accounting technique used for recording investments in associate companies where the investment is initially recorded at cost and subsequently adjusted for the investor’s share of the net profits or losses of the investee.

Consolidation Worksheet Entries

Journal entries used in preparing consolidated financial statements, helping to adjust and eliminate internal transactions between parent and subsidiary entities.

Fair Value

An estimate of the price at which an asset or liability could be exchanged in a current transaction between willing parties.