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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

Solutions

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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