Using the one-period valuation model, assuming a year-end dividend of $0.11, an expected sales price of $110, and a required rate of return of 10 percent, the current price of the stock would be ________.
A) $110.11
B) $121.12
C) $100.10
D) $100.11

Question

Quizplus · Accepted Answer

According to the one-period valuation model, the current stock price (P0) can be calculated as: P0 = (Dividend + Expected sales price) / (1 + Required rate of return)
Plugging in the given values, we get: P0 = ($0.11 + $110) / (1 + 0.10) = $100.10
Therefore, the correct choice is C) $100.10.

Using the One-Period Valuation Model, Assuming a Year-End Dividend of $0.11