JustKidding Corporation has an odd dividend policy. The company has just paid a dividend of $9...

JustKidding Corporation has an odd dividend policy. The company has just paid a dividend of $9 per share and has announced that it will increase the dividend by $4 per share for each of the next five years, and then never pay another dividend. If you require a return of 10 percent on the company’s stock, how much will you pay for a share today?

Expert Solution

you will pay $76.73for a share today
Statement showing Current Price
Particulars	Time	PVf 10%	Amount	PV
Cash inflows (Dividend)	1.00	0.9091	13.00	11.82
Cash inflows (Dividend)	2.00	0.8264	17.00	14.05
Cash inflows (Dividend)	3.00	0.7513	21.00	15.78
Cash inflows (Dividend)	4.00	0.6830	25.00	17.08
Cash inflows (Dividend)	5.00	0.6209	29.00	18.01
Current Price of Stock				76.73

jeff jeffy answered 1 year ago

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