Question

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

Answer 1

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.