Final answer:
To find the maximum price you can pay for the stock today, calculate the present value of the expected future stock price and dividend. Then, add the present values to get the maximum price. In this case, the most you can pay for the stock today is $20.00.
Step-by-step explanation:
To calculate the maximum price you can pay for the stock today, you need to use the concept of present value. The present value is the current value of a future cash flow. In this case, the cash flow consists of the expected future stock price and the dividend.
You can calculate the present value by discounting the future cash flow using the required rate of return. The required rate of return in this example is 15%.
The formula to calculate the present value is:
Present Value = Future Cash Flow / (1 + Required Rate of Return)
Using this formula, the present value of the expected stock price in one year would be $22 / (1 + 0.15) = $19.13.
The present value of the expected dividend would be $1 / (1 + 0.15) = $0.87.
To find the maximum price you can pay for the stock today, you need to add the present values of the expected future stock price and dividend:
Maximum Price = Present Value of Stock Price + Present Value of Dividend = $19.13 + $0.87 = $20.00.
Therefore, the most you can pay for the stock today is $20.00.