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Value of stock

A financial analyst expects KacieCo. to pay a dividend of $3 per share one year from today, a dividend of $3.50 per share in year two, and estimates the value of the stock at the end of year two to be $28. If your required return on KacieCo. stock is 15%, what is the most you would be willing to pay for the stock today if you plan to sell the stock in two years?
a) $26.09
b) $26.43
c) $28.90
d) $34.00

Please show in detail how to solve this problem!!!

Solution Preview

A financial analyst expects KacieCo. to pay a dividend of $3 per share one year from today, a dividend of $3.50 per share in year two, and estimates the value of the stock at the end of year two to be $28.  If your required return on ...

Solution Summary

Calculates the value of a stock using discounted value of dividends and the stock price two years from now.

$2.19