PC Company stockholders expect to receive a year-end dividend of $10 per share and then be sold for $122 dollars per share. If the required rate of return for the stock is 20%, what is the current value of the stock?

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PC Company stockholders expect to receive a year-end dividend of $10 per share and then be sold for $122 dollars per share.  If the  required rate of return for the stock is 20%, what is the current value of the stock?

  1. A) $100
  2. B) $122
  3. C) $132
  4. D) $110
  5. E) None of the above
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Answer: D

 

P = (122+10)/1.2 = 110

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