You have the opportunity to buy 800 shares of Tata Motors stock. Its last dividend paid was $3.00. You expect the dividend to grow at 14% for the next 2 years with dividend growth then becoming constant at 5% for the future. How much would you pay for the stock today if your required rate of return is 18%?

You can buy up to 800 shares of Tata Motors. It is possible to buy 800 shares of tata motors stock.

For example, to find out how much 800 Tata Motors stocks are worth today, you must calculate the current price of each stock by taking into account both their last dividend and future expected earnings. This can be done using the Dividend Discount Model (DDM), which takes into account certain factors such as a stock’s most recent dividend payment (D₀) and expected rate of return (r).

In this instance, since the last dividend paid was $3.00 and the required rate of return is 18%, we can calculate the present value according to DDM: PV = D₀/r = 3.00/0.18 = 16.67.

To calculate an appropriate purchase, you will need to factor in your projected dividend growth of 14% over two years, before it becomes constant at 5%. To do this, we would use the Constant Growth Model equation: PV= D₀ x [1/(1+r)] + g /( r – g ), where D₀ is again the last dividend paid ($3.00) while “g” represents its growth rate over time (14%). Plugging these values into our formula yields a result of 17.68 – meaning that an investment worth 17.68 per share would yield a return equal to your required rate of 18%. To buy 800 shares today, you would need to spend around $14156.