# Stock Price Calculator

Instructions: Use this Stock Price Calculator to compute the price of a stock with growing dividend, by providing the value of the initial dividend paid ($$D$$), the discount rate per period ($$r$$), and the growth rate per period ($$g$$): Dividend per Period $$(D)$$ = Discount rate per period $$(r)$$ = Dividend growth rate per period $$(g)$$ =

## Stock Value Calculator

More about this growth stock value calculator so you can better understand how to use this corporate finance calculator.

### How do you compute the value of a stock

As with financial assets, one common way of valuing it is to compute the present value of cash flows associated to the asset. The price of a stock depends on whether it gives dividends or not and whether the dividend value grows or not.

Assuming a that the dividend of the stock grows at a rate of $$g$$, with a dividend of $$D$$ and a is discount rate of $$r$$, the price of the stock is computed sing the following formula:

$\text{Stock Value} = \displaystyle \frac{D}{r-g}$

Observe that this calculator does not indicate the price of the stock, it is rather the value of the stock , considering the present value of all the cash flows associated to it. ### Example of the calculation of the value of a stock: Dividend Model

Question: Assume that a firm pays out dividends of \$1.34 per share. Assuming a discount rate of 4%, and also under the assumption that the firm has a dividend growth of 2%, compute the value of the stock.

Solution:

This is the information we have been provided with:

• The dividend pay per period is $$D = 1.34$$, and the appropriate discount rate per period is $$r = 0.04$$ and the dividend growth rate is $$g = 0.02$$.

Therefore, the price of the corresponding stock is

: $\begin{array}{ccl} P & = & \displaystyle \sum_{n = 1}^{\infty} \frac{D}{(1+r)^n} \\\\ \\\\ & = & \displaystyle \frac{D}{1+r} + \frac{D \times (1+g)}{(1+r)^2} + ... \\\\ \\\\ & = & \displaystyle \frac{D}{r-g} \\\\ \\\\ & = & \displaystyle \frac{1.34}{0.04 - 0.02} \\\\ \\\\ & = & 67 \end{array}$

Therefore, price for the stock price with zero-growth, a dividend of $$D = 1.34$$ and a discount rate of $$r = 0.04$$ is $$\text{\textdollar}67$$.

### Other corporate finance calculator

If instead you are interested in estimating bonds, you can use our bond price solver , or you may also be interest in the special case of Zero Growth Stock Price .