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A firm is expected to pay a dividend of $13.29 next year and $13.95 the following...

A firm is expected to pay a dividend of $13.29 next year and $13.95 the following year and financial analysts believe the stock will be at their target price of $206.69 in two years -Compute the value of this stock assuming a required return of 13.25%.

Solutions

Expert Solution

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

=13.29/1.1325+13.95/1.1325^2+206.69/1.1325^2

which is equal to

=$183.77(Approx)

jeff jeffy answered 2 years ago
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