A company just paid a $1.60 per share annual dividend. The company is planning on paying...

A company just paid a $1.60 per share annual dividend. The company is planning on paying $2.90, $3.05, $3.15, and $3.30 a share over the next 4 years, respectively. After that, the dividend will be a constant $3.35 per share per year. What is this stock worth to you per share if you require a 11.25% rate of return?
Question 7 options: $26.06
$26.78
$27.51
$28.23
$28.95

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Expert Solution

Year	Particulars	Cash flow	× discount rate	Present value
1	Dividend	2.90	0.89888	$ 2.61
2	Dividend	3.05	0.80798	$ 2.46
3	Dividend	3.15	0.72627	$ 2.29
4	Dividend	3.30	0.65283	$ 2.15
4	Share price	29.78	0.65283	$ 19.44

Stock price today				$ 28.95

Answer is 28.95

please rate.

jeff jeffy answered 1 year ago

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