Winter Time Adventures is going to pay an annual dividend of $2.86 a share on its commonstock next year. This year, the company paid a dividend of $2.75 a share. The company adheres to a constant rate of growth dividend policy. What will one share of this common stock be worth five years from now if the applicable discount rate is 11.7 percent?

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Winter Time Adventures is going to pay an annual dividend of $2.86 a share on its commonstock next year. This year, the company paid a dividend of $2.75 a share. The company adheres to a constant rate of growth dividend policy. What will one share of this common stock be worth five years from now if the applicable discount rate is 11.7 percent?

 

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Answer:

share of this common stock be worth five years from now= $ 45.19

Working notes for the above answer

g = 2.86- 2.75 /2.75

g =0.04

 

P5 =2.86 (1+0.04)5  /0.117-0.04

P5 =$ 45.19

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