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the current price of this stock

You are trying to determine the appropriate price to pay for a share of common stock. If you purcahse this stock, you plan to hold it for 1 year. At the end of the year you expect to receive a dividend of $5.50 and to sell the stock for $154. The appropriate rate of return for this stock is 16 percent. What should be the current price of this stock?

P0 = D1 (1+Gc)
__________
(1 + r)^1

P0 = $5.50 + $154
_____ _______

(1.16) (1.16)

P0 = $4.74 + $132.75

P0 = $128 Answer ???????

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You are trying to determine the appropriate price to pay for a share of common stock. If you purcahse this stock, you plan to hold it for 1 year. At the end of the year you expect to receive a dividend of $5.50 and to sell the stock for $154. The appropriate rate ...

Solution Summary

Solution contains calculations of the current price of this stock.

$2.19