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Park's Asian Markets Restaurants currently (d0) pays a $1.50 common stock dividend. Robert is considering an...

Park's Asian Markets Restaurants currently (d0) pays a $1.50 common stock dividend. Robert is considering an investment in Park's Asian markets restaurants and plans to hold the stock for three years, at which time he expects to sell the stocks for $50. Robert Expects the dividend to increase to $2.00 one year from now, $2.75 in two years and $3.75 in three years. What is the current value of Park's Asian markets restaurants common stock to Robert if he requires a 12 percent rate of return?

Solutions

Expert Solution

Current price=Future dividend and value*Present value of discounting factor(rate%,time period)

=2/1.12+2.75/1.12^2+3.75/1.12^3+50/1.12^3

which is equal to

=$42.24(Approx)

jeff jeffy answered 2 years ago
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