Corn Inc. has just paid a dividend of 6$ per share and has announced that it will increase the dividend by $2 per share for each of the next four years, and then never pay another dividend. If you require an 11% return on the company's stock how much will you pay for a share today?© BrainMass Inc. brainmass.com March 4, 2021, 5:36 pm ad1c9bdddf
In years 1-4, the dividends increase by $2. To arrive at the present value for these years, you would just apply the discount factor (1/(1+0.11))^n, where n is ...
The solution clearly explains the steps that are needed to calculate a share price based on investors required rate of return. The solution also has an attachment that explains the calculations in detail. The solution goes into quite a bit of detail. It is an excellent response for students who want to understand the concepts and then use the same concepts to solve similar problems in the future. Overall, a very good response.