Question

Singing Fish Fine Foods has a current annual cash dividend policy of ​$2.75. The price of the stock is set to yield a return of 10%. What is the price of this stock if the dividend will be paid a for 10 years? for 17 ​years? c.  for 42 ​years? d.  for 60 ​years? e.  for 100 ​years?

Answer 1

This question requires application of dividend discount model, according to which current value of share is present value of all dividends expected in future.

a) 10 Years

Price = $16.90

b) 17 Years

Price = $22.06

c) 42 Years

Price = $27.00

d) 60 Years

Price = $27.41

e) 100 Years

Price = $27.50