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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 $2.20, $2.35, $2.45, and $2.60 a share over the next 4 years, respectively. After that, the dividend will be a constant $2.65 per share per year. What is this stock worth to you per share if you require a 9.50% rate of return?

$26.37

$27.05

$27.72

$28.40

$29.07

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Expert Solution

Year Particulars Cash flow × discount rate Present value
1 Dividend               2.20             0.91324 $            2.01
2 Dividend               2.35             0.83401 $            1.96
3 Dividend               2.45             0.76165 $            1.87
4 Dividend               2.60             0.69557 $            1.81
4 Share price             27.89             0.69557 $          19.40
Stock price today $          27.05

Answer is $27.05

please rate.

jeff jeffy answered 1 year ago
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