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?
5. $15.71© BrainMass Inc. brainmass.com October 9, 2019, 9:34 pm ad1c9bdddf
The value of the stock is the present value of all dividends. The dividend in year 5 D5 = 3.10 ...
The solution computes the present value of a stock based on dividend payments.