A firm recently paid a $0.80 annual dividend. The dividend is expected to increa

Question

A firm recently paid a $0.80 annual dividend. The dividend is expected to increase by 13 percent in each of the next four years. In the fourth year, the stock price is expected to be $59.

If the required return for this stock is 15.50 percent, what is its current value? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

A firm recently paid a $0.80 annual dividend. The dividend is expected to increase by 13 percent in each of the next four years. In the fourth year, the stock price is expected to be $59.

Explanation / Answer

Hi,

Current Value = .80*(1+13%)^1/(1+.1550)^1 + .80*(1+13%)^2/(1+.1550)^2 + .80*(1+13%)^3/(1+.1550)^3 + .80*(1+13%)^4/(1+.1550)^4 + 59/(1+.1550)^4 = $36.18

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.