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Brickhouse is expected to pay a dividend of $3.40 and $2.56 over the next two years,...

Brickhouse is expected to pay a dividend of $3.40 and $2.56 over the next two years, respectively. After that, the company is expected to increase its annual dividend at 4.2 percent. What is the stock price today if the required return is 11.8 percent? Multiple Choice

$31.11

$28.07

$37.93

$33.16

$35.58

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Expert Solution

Based on the given data, pls find below calculations:

Year 0 Year 1 Year 2 Terminal
Dividend Payout          3.40          2.56          2.67
Discounting Factor      1.0000      0.8945      0.8000
Present Values          3.04          2.05
Value for Year 1 & 2)           5.09
Discounting Factor 11.80%
Perpetual Growth Rate 4.20%
Terminal Value        35.10
PV of Terminal Value        28.07
Stock Price Today        33.16

jeff jeffy answered 1 year ago
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