A company just paid a dividend of $1.50 per share. The consensus forecast of financial analysts...

A company just paid a dividend of $1.50 per share. The consensus forecast of financial analysts is a dividend of $1.70 per share next year, $2.40 per share two years from now, and $2.70 per share in three years. You expect the price of the stock to be $28 in two years. If the required rate of return is 10% per year, what would be a fair price for this stock today? (Answer to the nearest penny.)

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Expert Solution

Fair Price for this stock today =Dividend Year 1/(1+r)+Dividend Year 2/(1+r)^2+Price in year 2/(1+r)^2
=1.70/1.10+2.40/1.1^2+28/1.1^2 =26.67

jeff jeffy answered 2 years ago

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