Calculate Current Price - Definition, Formula and Example

Definition:

Current Price refers to the cost of an individual share of a total amount of marketable shares of a firm.

Example :

Raj's current annual dividend of a share is 1000, his constant growth rate (g) and the required rate of return is 10%. Compute his current price of a share?

Given,

Current Annual Dividend = 1000 Required Rate of Return (k) = 10 % Constant Growth Rate (g) = 100000

To find,

Current price (CP) of a share

Solution:

CP = [1000 * (1 + 8.9109%)] / (10% - 8.9109%) CP = [1000 * (1 + 0.089109)] / (0.1 - 0.089109) CP = (1000 * 1.089109) / 0.010891 CP = 1089.109 / 0.010891 CP = 100000