Answered

Welcome to Westonci.ca, where you can find answers to all your questions from a community of experienced professionals. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently. Get quick and reliable solutions to your questions from a community of experienced experts on our platform.

The Red Bud Co. pays a constant dividend of $1.20 a share. The company announced today that they will continue to do this for another 3 years after which time they will discontinue paying dividends permanently. What is one share of this stock worth today if the required rate of return is 7 percent

Sagot :

Answer:

the  one share of this stock worth today is $3.15

Explanation:

The computation of the  one share of this stock worth today is shown below:

= Dividend per share ÷ (1 + required rate of return^years) + Dividend per share ÷ (1 + required rate of return^years) + Dividend per share ÷ (1 + required rate of return^years)

= ($1.20 ÷ 1.07^1) + ($1.20 ÷ 1.07^2) + ($1.20 ÷ 1.07^3)

= $3.15

hence, the  one share of this stock worth today is $3.15

We hope you found this helpful. Feel free to come back anytime for more accurate answers and updated information. We appreciate your time. Please come back anytime for the latest information and answers to your questions. Get the answers you need at Westonci.ca. Stay informed by returning for our latest expert advice.