Question

g Suppose Acap Corporation will pay a dividend of per share at the end of this year and per share next year. You expect​ Acap's stock price to be in two years. Assume that​ Acap's equity cost of capital is . a. What price would you be willing to pay for a share of Acap stock​ today, if you planned to hold the stock for two​ years?

Answer 1

The information is missing, so I looked for a similar question and found the following:

Suppose Acap Corporation will pay a dividend of $2.73 per share at the end of this year and $3.06 per share next year. You expect Acap’s stock price to be $53.83 in two years. Assume that Acap’s equity cost of capital is 8.6%.

a) we must discount the future values in order to determine the present value of the stock:

current stock price = $2.73/1.086 + $3.06/1.086² + $53.83/1.086² = $2.51 + $2.59 + $45.64 = $50.74

You should be willing to pay up to $50.74 per stock.