This stock price calculator approximates an acceptable purchase price of a stock by considering dividends per share, your desired rate of return and a stock growth rate. There is in depth information on this topic below the tool.
How does this stock price calculator work?
This investment calculator can help in estimating an acceptable purchase price of a stock by taking account of the following variables:
Dividend per share now (DPS).
Stock growth rate which (SGR) is the percentage of the increase on the dividends received year per year.
Desired stock rate of return (DRR) which is a percent you specify you would like to earn from holding the stock.
No. of share you want to buy (NSB).
The algorithm behind this stock price calculator applies the formulas explained here:
Finding the growth factor A = 1 + SGR*0.01
Computing the future dividend value B = DPS * A
Calculating the Estimated stock purchase price that would be acceptable C = B / (DRR*0.01 – SGR*0.01)
Then the following indicators are computed:
- Total you will have to pay to purchase shares D = NSB * C
- Dividend value received in the 1st year E = NSB * B
- Dividend value received in the 2nd year F = E * SGR * 0.01
- Dividend value received in the 3rd year G = F * SGR * 0.01
- Total cumulative dividends you could receive in 3 years H = E + F + G
Example of a calculation
Let’s assume an individual analyses the posibility to buy a stock that within the last period paid an average dividend of $15/share, while the stock growth rate is considered to increase by an average of 5% year per year, and the expected rate of return is 10%. What will the results be if 1,000 shares will be purchased?
■ Estimated stock purchase price that would be acceptable = $315.00
■ Total you will have to pay to purchase 1,000 shares = $315,000.00
■ Roughly estimate of the value of the dividends you will receive:
- In the 1st year you will receive = $15,750.00
- In the 2nd year you will receive = $16,537.50
- In the 3rd year you will receive = $17,364.38
Total cumulative dividends you could receive in 3 years = $49,651.88.27 Feb, 2015