plans to pay dividends of $1.36, $1.15, $1.35, and $.40 at the end of the next four years, respectively. After that, the company will be sold and shareholders are expected to receive $82.40 per share in Year 6 when the sale should be finalized. If the required return is 11.4 percent, what is the current value of one share of this stock

Question

Elisa Branch

Business

5 August, 22:32

plans to pay dividends of $1.36, $1.15, $1.35, and $.40 at the end of the next four years, respectively. After that, the company will be sold and shareholders are expected to receive $82.40 per share in Year 6 when the sale should be finalized. If the required return is 11.4 percent, what is the current value of one share of this stock

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Tobie · Answer 1

MV=$46.5

Explanation:

MV=D1 / (Ke-g)

Mv=1.15 / (.114-0.089)

MV=46.5

Where MV=?

Ke=11.4%

g=8.95% it calculated by discounting all dividends with Ke

D1=1.15