Question
In: Finance
The current price of a stock is ?$68.36. If dividends are expected to be ?$1.00 per...
The current price of a stock is ?$68.36. If dividends are expected to be ?$1.00 per share for the next six ?years, and the required return is 6%, then what should the price of the stock be in 6 years when you plan to sell? it?
The price 5 years from now will be ?$____ . ?(Round your response to the nearest? dollar.)
Solutions
Expert Solution
P0 = PV of Cash Flows from it.
| Year | CF | PVF @6% | Disc CF |
| 1 | 1 | 0.94339623 | 0.9434 |
| 2 | 1 | 0.88999644 | 0.8900 |
| 3 | 1 | 0.83961928 | 0.8396 |
| 4 | 1 | 0.79209366 | 0.7921 |
| 5 | 1 | 0.74725817 | 0.7473 |
| 6 | 1 | 0.70496054 | 0.7050 |
| 6 | P6 | 0.70496054 | 0.7050*P6 |
| P0 | 4.9173 + 0.7050(p6) | ||
Given P0 = 68.36
Thus 4.9173 + 0.7050*P6 = 68.36
0.7050 * p6 = 68.36 - 4.9173
= 63.44
P6 = 63.44 / 0.7050
= 89.99
jeff jeffy answered 1 year agoRelated Solutions
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