Answered

Welcome to Westonci.ca, your one-stop destination for finding answers to all your questions. Join our expert community now! Our platform provides a seamless experience for finding reliable answers from a network of experienced professionals. Get precise and detailed answers to your questions from a knowledgeable community of experts on our Q&A platform.

Mother and Daughter Enterprises is a relatively new firm that appears to be on the road to great success. The company paid its first annual dividend yesterday in the amount of $.28 a share. The company plans to double each annual dividend payment for the next three years. After that time, it is planning on paying a constant $1.50 per share indefinitely. What is one share of this stock worth today if the market rate of return on similar securities is 11.5%

Sagot :

Answer:

$12.43

Explanation:

Price of the stock can be determined by calculating the present value of the stock

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow in year 1 = 0.28 x 2  

Cash flow in year 2 = 0.56 x 2  

Cash flow in year 3 = 1.12 + 1.50 0.115

I = 11.5

PV = 12.43

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute  

Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. Westonci.ca is here to provide the answers you seek. Return often for more expert solutions.