A stock is expected to pay $0.80 per share every year indefinitely. If the curre

Question

A stock is expected to pay $0.80 per share every year indefinitely. If the current price of the stock is $18.90, and the equity cost of capital for the company that released the shares is 6.4%, what price would an investor be expected to pay per share five years into the future?

A stock is expected to pay $0.80 per share every year indefinitely. If the current price of the stock is $18.90, and the equity cost of capital for the company that released the shares is 6.4%, what price would an investor be expected to pay per share five years into the future?

$22.65

$20.43

$21.23

$12.50

$22.65

$20.43

$21.23

$12.50

Explanation / Answer

A stock is expected to pay $0.80 per share every year indefinitely. If the current price of the stock is $18.90, and the equity cost of capital for the company that released the shares is 6.4%, what price would an investor be expected to pay per share five years into the future?

price would an investor be expected to pay per share five years into the future = 0.80/6.4%

price would an investor be expected to pay per share five years into the future = $ 12.50

Answer

d) $ 12.50

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