Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $4...

Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $4 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require a return of 14 percent on the company’s stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Expert Solution

Year	Cash flow	PVIF@14%	Present value
0	$ -	1.0000	$ -
1	$ 10.00	0.8772	$ 8.77
2	$ 16.00	0.7695	$ 12.31
3	$ 22.00	0.6750	$ 14.85
4	$ 28.00	0.5921	$ 16.58
5	$ 34.00	0.5194	$ 17.66

Current share price			$ 70.17

jeff jeffy answered 1 year ago

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