5. You expect receive $3.00 dividend in year 1, $2.20 dividend in year 2 and $2.40...

5. You expect receive $3.00 dividend in year 1, $2.20 dividend in year 2 and $2.40 dividend in year 3 along with stock price of $ 20.450. Now how much would you be willing to pay

i need now

value is 10%

Expert Solution

	Year 0	Year 1	Year 2	Year 3
Dividends		3.00	2.20	2.40
Share Price				20.45
Total	-	3.00	2.20	22.85
Discount Factor	1.0000	0.9091	0.8264	0.7513
Discounted Flows	-	2.73	1.82	17.17
Present Value	21.71

The Discounting factor is computed based on the formula: For year 0, the discounting factor is 1; For Year 1, it is computed as = Year 0 factor /(1+discounting factor%) ; Year 2 = Year 1 factor/(1+discounting factor %) and so on;

Discounted Flows = Normal Flows * Discounted Factor

Present Value = Total of all the Discounted Flows

jeff jeffy answered 2 years ago

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5. You expect receive $3.00 dividend in year 1, $2.20 dividend in year 2 and $2.40...

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