Wicked Textiles Inc. just paid its annual dividend of $2.50 per share. The dividends are expected...

Wicked Textiles Inc. just paid its annual dividend of $2.50 per share. The dividends are expected to grow for the next 2 years at 10% rate, and then slow down to a 4% annual rate forever. If investors require 15% return: 8) What is the terminal value of Wicked Textiles in Year 2 (P2)? Question 8 options: $17.52 $28.60 $25.04 $30.31 Question 9 (3.33 points) 9) What should be the current stock price of Wicked Textiles? Question 9 options: $26.30 $17.93 $39.59 $27.69

Expert Solution

Q8 $28.60
Q9 $26.30
Statemnet showing Current Price
Particulars	Time	PVf 15%	Amount	PV
Cash inflows (Dividend)	1.00	0.8696	2.7500	2.39
Cash inflows (Dividend)	2.00	0.7561	3.0250	2.29
Cash inflows (Price)	2.00	0.7561	28.6000	21.63
Current Price of Stock				26.30

P2= D3/ke-g
P2 = 3.025*1.04/(15%-4%)
P2 = 3.146/(11%)
P2 = $28.60

jeff jeffy answered 1 year ago

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