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Arcs and Triangles paid an annual dividend of $1.47 a share yesterday. The company is planning...

Arcs and Triangles paid an annual dividend of $1.47 a share yesterday. The company is planning on paying $2.55, $2.63, and $3.65 a share over the next three years, respectively. After that, the dividend will be constant at $4.80 per share per year.What is the market price of this stock if the market rate of return is 10 percent?

A. $43.30 B. $39.98 C. $48.07 D. $57.40

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Expert Solution

A. $43.30
Statemnet showing Current Price
Particulars Time PVf 10% Amount PV
Cash inflows (Dividend)                           1.00                   0.9091                        2.55                        2.32
Cash inflows (Dividend)                           2.00                   0.8264                        2.63                        2.17
Cash inflows (Dividend)                           3.00                   0.7513                        3.65                        2.74
Cash inflows (Price) = 4.80/10%                         3.00                   0.7513                      48.00                      36.06
Current Price of Stock                      43.30

jeff jeffy answered 1 year ago
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