Question

10-19) The next three annual dividends paid by Oxygen Optimization stock are expected to be 4.33...

10-19)

The next three annual dividends paid by Oxygen Optimization stock are expected to be 4.33 dollars in one year, 3.88 dollars in two years, and 5.94 dollars in three years. The price of the stock is expected to be 94.83 dollars in two years. The expected annual return for the stock is 13.71 percent. What is the current price of one share of Oxygen Optimization stock?

Homework Answers

Answer #1

Stock price today = $84.19

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Stock current price is the sum of discounted value of all the cash inflow from the stock

Year

cash flow

PV factor @ 13.71% [1/(1+r)^n

PV of cash flow

1

4.33

0.8794

3.80793246

2

94.83 + 3.88

0.7734

76.34205264

3

5.94

0.6801

4.040084665

Total

84.19006977

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