Question

Valorous Corporation will pay a dividend of

$ 1.70

per share at this year's end and a dividend of

$ 2.50

per share at the end of next year. It is expected that the price of Valorous' stock will be

$ 42

per share after two years. If Valorous has an equity cost of capital of

10%,

what is the maximum price that a prudent investor would be willing to pay for a share of Valorous stock today?

Answer #1

**SEE THE IMAGE. ANY DOUBTS,
FEEL FREE TO ASK. THUMBS UP PLEASE**

**EXPLANATION : To find the
answer, we have to discount the dividends and price at the end of
year 2 at 10%**

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