You are considering a stock which will pay dividends of $4.50 during the next year. Further assume that you will be able to sell the stock for $85.00 one year from today and that your required rate of return is 15 percent. How much would you be willing to pay for the stock today? (Round off to the nearest $0.01)
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PV(dividends) = Dividends / (1 + r) PV(dividends) = $4.50 / (1 + 0.15) PV(dividends) = $3.91 Show more…
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