Anurag has invested in a share whose dividend is expected to grow @ 15% for 5 years and thereafter @ 5% till life of the company. Find out the value of the share, if current dividend is ₹4 per share and investors' requir

Calculation of present value of dividend at 15% for 5 years Year Dividend D t = D o (1+g) t D t PVF @ 6% PV 1 4(1+0.15) 1 4.6000 0.9434 4.3396 2 4(1+0.15) 2 5.2900 0.8900 4.7081 3 4(1+0.15) 3 6.0835 0.8396 5.1077 4 4(1+0.15) 4 6.9960 0.7921 5.5415 5 4(1+0.15) 5 8.0454 0.7473 6.0123 31.0149 25.7092 Total dividends of ₹31.0149 are expected in the next 5 years, which has PV of ₹25.7092 @ 6%. The value of equity share at the end of the 6th year: Dividend for 6th year D 6 = D 5 (1+g) = 8.0454 (1+0.05) = 8.4476 P 5 = D 6 / (K e - g) = 8.4476 / (0.06 - 0.05) = ₹844.76 So, the share price is at P 5 = ₹844.76 Present Value of this @ 6% = 844.76 x 0.7473 = 631.29 Value of share = present value of dividend + present value of expected price = 25.71 + 631.29 = ₹657