Estimating Stock Price of Food Industries Using Variable Growth Model

How can we estimate the stock price of Food Industries using the variable growth model?

What factors do we need to consider in calculating the stock price?

The estimated stock price of Food Industries using the variable growth model is RM19.965 at the end of the third year and RM20.96325 for the foreseeable future.

To estimate the stock price of Food Industries using the variable growth model, we need to consider the dividend growth rate and the required return. The variable growth model, also known as the Gordon Growth Model, calculates the present value of future dividends assuming a constant growth rate.

Estimating the stock price of Food Industries using the variable growth model involves considering the dividend growth rate, required return, and factors affecting future dividends.

The formula for the stock price using the variable growth model is: Stock Price = Dividend / (Required Return - Growth Rate)

First, we calculate the stock price at the end of the third year by considering the growth rate for the next three years due to the introduction of a new boat. This growth rate is 10% per year.

Next, we calculate the stock price for the foreseeable future after the introduction of a mature product line, with a growth rate of 5% per year.

By following the formula and considering these growth rates, we can estimate the stock price of Food Industries at different time points.

The estimated stock price gives insights into the valuation of the company and helps investors make informed decisions based on pricing analysis.