Question

Singing Fish Fine Foods has a current annual cash dividend policy of ​$2.25. The price of the stock is set to yield a return of 14 %. What is the price of this stock if the dividend will be paid a. for 12 ​years? b. for 16 ​years? c. for 40 ​years? d. for 60 ​years? e. for 100 ​years? f. ​forever? a. What is the price of this stock if the dividend will be paid for 12 ​years?

Answer 1

Price = $12.73

Step-by-step explanation:

DATA:

Dividend = 2,25

Yield / r = 14%

n (number of years) = 12 years

Price = ?

Price of the stock can be calculated by the following formula

Formula: Price = Dividend x
`1-((1)/((1+r)^(n) ) )/(r)`

Price = Dividend x
`1-((1)/((1+0.14)^(12) ) )/(0.14)`

Price = $2.25 x 5.66

Price = $12.73

The price of this stock if the dividend will be paid for 12 ​years will be $12.73