The dividend for Should I, Inc., is currently $1.2 per share. It is expected to

Question

The dividend for Should I, Inc., is currently $1.2 per share. It is expected to grow at 20 percent next year and then decline linearly to a 5 percent perpetual rate beginning in four years. If you require a 18 percent return on the stock, what is the most you would pay per share? (Round intermediate calculations to 3 decimal places and final answer to 2 decimal places. Omit the "$" sign in your response.)

The dividend for Should I, Inc., is currently $1.2 per share. It is expected to grow at 20 percent next year and then decline linearly to a 5 percent perpetual rate beginning in four years. If you require a 18 percent return on the stock, what is the most you would pay per share? (Round intermediate calculations to 3 decimal places and final answer to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

Pay Per Share = 1.2+1.2*1.2/1.18+1.2*1.2/1.18^2+1.2*1.2/1.18^3+1.2*1.2/(1.18^4*(0.18+0.05)) = 7.56

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