Widji Outfitters Is Expected to Pay a Dividend (D1)of $1

question 86

Essay

Widji Outfitters is expected to pay a dividend (D1)of $1.00 next year with an expected constant growth in dividends of 5%.The required rate of return is 11%.
a)Calculate the present value of this stock?
b)What will be the new price of this stock if the discount rate rises to 12%
c)What will be the new price of this stock if the discount rate falls to 10%?

---

Definitions:

Incremental Value

The additional value generated by taking a specific action, such as implementing a project, over the base case without taking the action.

Equity-Financed

Describes projects or purchases funded through the issuance of equity or shares, rather than debt.

Incremental Value

The additional or extra value generated by undertaking a new project or action, calculated as the difference in total value with and without the project.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment, calculated by discounting future cash flows to the present value.