Purchase Solution

Current Market Value of Common Stock and Rate of Return

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A firm is expected to pay a cash dividend of \$1.10 one year from now, \$2.20 two years from now, and \$4.40 three years from now. Also, the market price of their common stock is expected to be \$73 immediately following the dividend payment three years from now. What is the approximate current market value of this firm's common stock when the required rate of return is 18%?

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In just six lines of calculations, the posting is answered with ease.

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Cash dividend of: 1.10 in one year, PV = 1.10/(1+0.18) = 0.9322
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