Question

In: Finance

Which of the following values is closest to the amount that should be paid for a...

Which of the following values is closest to the amount that should be paid for a stock that will pay a dividend of $10 in one year and $11 in two years? The stock will be sold in 2 years for an estimated price of $120. The appropriate discount rate is 9%. Show steps

Solutions

Expert Solution

Year Cash Flow PV Factor PV Of Cash Flow
a b c=1/1.09^a d=b*c
1 $                   10 0.917431193 $                      9.17
2 $                   11 0.841679993 $                      9.26
2 $                120 0.841679993 $                 101.00
Stock Price $                 119.43

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