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The common stock of Dayton Repair is expected to pay a $2.28 per share dividend for...

The common stock of Dayton Repair is expected to pay a $2.28 per share dividend for each of the next two years. The company will pay no dividends after that, and is expected to be worth $52 per share at the end of year 3. What is the current price of the stock using a discount rate of 9%?

$40.15

$44.16

$45.92

$48.60

$52.00

Solutions

Expert Solution

Year Cash flow × factor@ 9.00% Present value
0 $                      -   1.0000 $                            -  
1 $                  2.28 0.9174 $                       2.09
2 $                  2.28 0.8417 $                       1.92
3 $               52.00 0.7722 $                     40.15
$                            -  
Price 2.5313 $                     44.16

Price is 44.16

jeff jeffy answered 2 years ago
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