Question

Calculate the current price of a stock that is expected to pay a dividend of $6/share at the end of each year from year 13 through year 21, given a discount rate of 11%. This stock is not expected to pay any dividends before, nor any dividends after, this 9-year r

Answer 1

$2.60

Step-by-step explanation:

As per given information the General dividend model is to be Used Value per share of stock = EDPS/ (1+k)^t

Where EDPS is the expected dividend at year t

K is the discount rate or required return

Substituting in the formula

6/(1+0.11)^8 =$2.60