The shoebox will not pay dividend for the next two years the following two years it will pay annual dividends of one dollar per share starting in year three the dividends will increase by 4% annually the discount rate is 5% what is the value of the stock today
Added by Virginia H.
Step 1
- Year 3 dividend: $1 - Year 4 dividend: $1 * 1.04 = $1.04 - Present value of Year 3 dividend: $1 / (1 + 0.05)^3 = $0.8638 - Present value of Year 4 dividend: $1.04 / (1 + 0.05)^4 = $0.8116 Show more…
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