JJ Companies will pay an annual dividend of $4.20 a share on its common stock next year.Last week,the company paid a dividend of $4.00 a share.The company adheres to a constant rate of growth dividend policy.What will one share of this stock be worth 8 years from now if the applicable discount rate is 14 percent?

Question

Quizplus · Accepted Answer

g = ($4.20 − 4.00)/ $4.00 = 0.05 P₈ = ($4.20 × 1.05⁸)/ (0.14 − 0.05) P₈ = $68.95

JJ Companies Will Pay an Annual Dividend of $4