Answer:
The answer is $36.76
Step-by-step explanation:
Solution
Given that:
Dividend on stock = $7.40
n = 8 years
Required return on the stock =12%
Thus we find the current share price
Now
Current share price will be the present value of cash dividends received over 8 years is given below
Current share price=$7.40 *Present value of annuity factor(12%,8)
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=7.4[1-(1.12)^-8]/0.12
=7.4*4.967639767
=$36.76
Therefore the current share price is $36.76