Prairies Oil Sands Inc.is expected to pay a dividend of $1 in one year.If the dividend growth rate is 2 percent forever and the required return is 10 percent,what should the stock be sold for five years from now?

Name: Prairies Oil Sands Inc.is expected to pay a dividend of $1 in one year.If the dividend growth rate is 2 percent forever and the required return is 10 percent,what should the stock be sold for five years from now?
Brand: Quizplus
Rating: 4.8 (54 reviews)

Question

Quizplus · Accepted Answer

Compute D₆ = $1*(1+2%)⁵ = $1.1041,Then P₅ = $1.1041/(10%-2%)= $13.80