The Farmer's Market recently announced that it will pay its first annual dividend two years from today.The first dividend will be $0.50 a share with that amount doubling each year for the following two years.After that,the dividend is expected to increase by 4 percent annually.What is the value of this stock today if the required return is 10 percent?

Question

Quizplus · Accepted Answer

P₄ = ($0.50 × 2² × 1.04)/(0.10 - 0.04) = $34.67; P₀ = [$0.50/1.10²] + [$1/1.10³] + [($2 + $34.67)/1.10⁴] = $26.21

The Farmer's Market Recently Announced That It Will Pay Its