Compute the present value of a Stock based on dividend payments
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Firm X is expected to pay its first annual dividend 5 years from now. That payment will be $3.10 a share. Starting in year 6, the company will increase the dividend by 2 percent per year. The required return is 15 percent. What is the value of this stock today?
1. $11.86
2. $12.09
3. $13.63
4. $14.66
5. $15.71
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Solution Summary
The solution computes the present value of a stock based on dividend payments.
Solution Preview
The value of the stock is the present value of all dividends. The dividend in year 5 D5 = 3.10 ...
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