Midtown Enterprises paid its first annual dividend yesterday in the amount of $.28 a share.The company plans to double each annual dividend payment for the next three years.After that,it will pay a constant $1.50 per share dividend indefinitely.What is one share of this stock worth today if the market rate of return on similar securities is 11.5 percent?

Question

Quizplus · Accepted Answer

P₃ = $1.50/.115 = $13.04P₀ = $.56/1.115 + $1.12/1.115² + ($2.24 + 13.04)/1.115³P₀ = $12.43

Midtown Enterprises Paid Its First Annual Dividend Yesterday in the Amount