Python Exercises for Corporate Finance and Risk Management

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Question: 59

Q: You expect the earnings and dividends of a firm to grow indefinitely by 5%. If the next year’s expected dividend is $10 and the market capitalization rate is 8%, what is the appropriate interval of your expectation of the current price.
  • Define a function with the name "stock_price" which will take three arguments dividend, discount rate, and growth rate.
  • The signature of the function should be like:

    def stockprice(dividend, discount_rate, growth_rate):

  • Use the following formula to calculate stock price.

    Stock price = dividend/(opportunity cost - growth rate)

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