Maritime Bank recently announced that its next semi-annual dividend (to be paid six months from now) will be $1.00 per share. A stock analyst's best estimate for the growth in future dividends is 4% compounded semi-annually.
a) If you require a rate of return of 7.8% compounded semi-annually on the stock, what maximum price should you be willing to pay per share? Ignore the present value of dividends beyond a 50-year time horizon.
b) What price do you obtain if you do not ignore dividends beyond 50 years? (Hint: Use a large value, say 1000, for n in the present value calculation.)

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The Answer of Maritime Bank recently announced that its next semi-annual dividend (to be paid six months from now) will be $1.00 per share. A stock analyst's best estimate for the growth in future dividends is 4% compounded semi-annually.
a) If you require a rate of return of 7.8% compounded semi-annually on the stock, what maximum price should you be willing to pay per share? Ignore the present value of dividends beyond a 50-year time horizon.
b) What price do you obtain if you do not ignore dividends beyond 50 years? (Hint: Use a large value, say 1000, for n in the present value calculation.)

Maritime Bank Recently Announced That Its Next Semi-Annual Dividend (To