Answered

Explore Westonci.ca, the top Q&A platform where your questions are answered by professionals and enthusiasts alike. Discover comprehensive answers to your questions from knowledgeable professionals on our user-friendly platform. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.

The Market Place recently announced that it will pay its first annual dividend two years from today. The first dividend will be $0.50 a share with that amount doubling each year for the following two years. After that, the dividend is expected to increase by 4 percent annually. What is the value of this stock today if the required return is 15 percent?

Sagot :

abiolataiwo2015

Answer:

$12.99

Explanation:

Calculation to determine the value of this stock today if the required return is 15 percent

First step is to calculate P4

P4= ($0.50 *2^2*1.04)/(0.15 - 0.04)

P4= $18.91

Now let calculate the value of this stock today (P0)

P0= [$0.50/1.15^2] + [$1/1.15^3] + [($2 + $18.91)/1.15^4]

P0= $12.99

Therefore the value of this stock today if the required return is 15 percent will be $12.99

We hope this was helpful. Please come back whenever you need more information or answers to your queries. Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. We're here to help at Westonci.ca. Keep visiting for the best answers to your questions.