Market price of a stock.
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The Extreme Reaches Corp. last paid a $1.50 per share annual dividend. The company is planning on paying $3.00, $5.00, $7.50, and $10.00 a share over the next four years, respectively. After that the dividend will be a constant $2.50 per share per year. What is the market price of this stock if the market rate of return is 15%?
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This solution shows how to calculate the market price of a stock in a step-by-step format.
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D0 = $1.50 a share annually, r = 15%. D1 = $3.00, D2 = $5.00, D3 = $7.50, and D4 = $10.00. ...
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