A stock is expected to pay dividends of $1.20 per share in Year 1 and $1.35 per share in Year 2.After that,the dividend is expected to increase by 2.5% annually.What is the current value of the stock at a discount rate of 14.5%?
A) $11.29
B) $10.87
C) $12.07
D) $13.39

Question

Quizplus · Accepted Answer

Price = $1.20/1.145 + $1.35/1.145² + [($1.35 × 1.025)/(0.145 − 0.025)]/1.145² = $10.87

A Stock Is Expected to Pay Dividends of $1