The recent dividend payout by IBM was $3.00. IBM's dividends are expected to grow about 6.5% per year. If your required rate of return is 17%. What is the expected stock price two years from now. Round the answer to the nearest integer

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Azul French

Business

27 October, 15:38

The recent dividend payout by IBM was $3.00. IBM's dividends are expected to grow about 6.5% per year. If your required rate of return is 17%. What is the expected stock price two years from now. Round the answer to the nearest integer

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Elisa Holmes · Answer 1

Answer for question:

The recent dividend payout by IBM was $3.00. IBM's dividends are expected to grow about 6.5% per year. If your required rate of return is 17%. What is the expected stock price two years from now. Round the answer to the nearest integer " is as explained below.

Explanation:

1. the expected stock price two years from now = 3 * 1.065^3 / (0.17 - 0.065)

the expected stock price two years from now = 34.51

2. FV = 0, N = 8, PMT = 288, rate = 4%

use PV funciton in Excel

value at time 0 = 1939.03