Charlie's Fish Market is planning on paying annual dividends of $1.20, $1.35, and $1.50 over the next 3 years, respectively. After that, Charlie's plans to pay a constant dividend of $1.75 per share each year. To compute the value of Charlie's stock today, you should first determine the value of the stock at the end of year _____.

Question

Quizplus · Accepted Answer

To compute the value of Charlie's stock today, you first need to determine the value of the stock at the end of year 3, because that is when the dividend payments become constant. The value at the end of year 3 will be used to calculate the present value of all future dividends, including the constant dividends starting from year 4 onwards.

Charlie's Fish Market Is Planning on Paying Annual Dividends of $1.20