Question

Shares Corporation is expected to pay annual dividends of $1.34 and $1.45 at the end of...

Shares Corporation is expected to pay annual dividends of $1.34 and $1.45 at the end of the next two years, respectively. After that, the company expects to pay a constant dividend of $1.50 a share. What is the value of this stock at a required return of 15.1 percent?

Group of answer choices

A. $7.77

B. $10.25

C. $9.76

D. $12.78

E. $9.93

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Homework Answers

Answer #1

As per the details given in the Question-
Correct Answer is option C
The VAlue of stock = 9.76
Enter the stroke in the financial calculator in the Cashflow mode-
C1 = 1.34
C2 = 1.45 + terminal value
C2 = 1.45 + 9.934 =11.384
I = 15.1
NPV = 9.76
Terminal value = Constant Dividend / Required rate
Terminal VAlue = 1.50 / 0.151
Terminal value = 9.934

I hope this clear your doubt.

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