Question

Apocalyptica Corp. pays a constant $18 dividend on its stock. The company will

maintain this dividend for the next 4 years and will then cease paying dividends
forever. If the required return on this stock is 7.78 percent, what is the current share
price?​

Answer 1

Given :

Apocalyptica Corp. pays a constant $18 dividend on its stock.

The company will maintain this dividend for the next 4 years and will then cease paying dividends forever.

To Find :

If the required return on this stock is 7.78 percent, what is the current share

price.

Solution :

Current price ( After 4 hours ) :

`C.P = 18[(1)/((1+0.10)^1)+(1)/((1+0.10)^2)+(1)/((1+0.10)^3)+(1)/((1+0.10)^4)]\\\\C.P=\$57.058`

Therefore, current share price is $57.058 .

Hence, this is the required solution.