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Your favorite company has a plan to pay dividends of $5.35, $9.45 and $12.65 in years 1, 2 and 3. Then, bad news, your company will be ceasing to exist and close down forever. As an investor, 9.3% caputures
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Your favorite company has a plan to pay dividends of $5.35, $9.45 and $12.65 in years 1, 2 and 3. Then, bad news, your company will be ceasing to exist and close down forever. As an investor, 9.3% caputures the risk of the investment. What should the price per share of this company be

User Rob Trickey
by
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1 Answer

1 vote

Answer:

$22.50

Step-by-step explanation:

Required return = 9.30%

Years Dividends PVF at 9.3% PV of dividend

1 5.35 0.91491308 4.894784995

2 9.45 0.83706595 7.910273227

3 12.65 0.76584258 9.687908752

Stock price 22.49296697

Price per share of the company = $22.49296697

Price per share of the company = $22.50

User Anpan
by
4.7k points
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