Explore BrainMass
Share

# Calculate stock price based on dividend scenarios

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

I need help with calculating stock price

Problem A

In 1 year, a stock is expected to pay a \$2.11 dividend and be priced at \$50 per share. What is the stock's price today if the required rate of return on the stock is 8%?

Problem B

You expect a stock to pay a dividend of \$1.59 and be priced at \$38 in 1 year.
a. What is the stock's price today, assuming a required rate of return of 7%?
b. If the required rate of return is 6%, how would that change the stock's price today?
Problem C

What is the price today of a stock whose dividend is \$3 per year forever? The stock's required rate of return is 7.5%.

#### Solution Preview

Problem A

In 1 year, a stock is expected to pay a \$2.11 dividend and be priced at \$50 per share. What is the stock's price today if the required rate of return on the stock is 8%?

The stock's price today is the present value of the dividend and ...

#### Solution Summary

This solution is comprised of a detailed explanation to calculate stock price based on dividend scenarios.

\$2.19