10. KL Airlines paid an annual dividend of $1.18 a share last month. The company
ID: 2711009 • Letter: 1
Question
10. KL Airlines paid an annual dividend of $1.18 a share last month. The company is planning on paying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $1.50 per share per year. What is the market price of this stock if the market rate of return is 10.5 percent?10. KL Airlines paid an annual dividend of $1.18 a share last month. The company is planning on paying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $1.50 per share per year. What is the market price of this stock if the market rate of return is 10.5 percent?
10. KL Airlines paid an annual dividend of $1.18 a share last month. The company is planning on paying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $1.50 per share per year. What is the market price of this stock if the market rate of return is 10.5 percent?
Explanation / Answer
Stock price = $1.50 / (1+10.5%) + $1.75 / (1+10.5%)2 + $1.80 / (1+10.5%)3 + $1.50 / [10.5% * (1+10.5%)3]
= $14.71
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