UTA Inc just announced that next year's dividend will be $1.40 per share, and the following...

UTA Inc just announced that next year's dividend will be $1.40 per share, and the following year will be $1.50 per share. After that point, stock analysts believe the dividend growth rate will remain constant at 5% per year, indefinitely. If the market currently requires a 15% rate of return on UTA Inc stock, the stock should be priced at __________per share.

A-$18.1

B-$14.26

C-$12.71

D-$11.91

Expert Solution

Discount rate	15.0000%
Cash flows		Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
-	0	-	-
1.400	1	1.22	1.22
15.000	1	13.04	14.26

terminal value = 1.5/(0.15 - 0.05) = 15.00

price = 14.26

jeff jeffy answered 2 years ago

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