Question

21) You are considering the purchase of 100 shares of a stock and are deciding how...

21) You are considering the purchase of 100 shares of a stock and are deciding how much you should be willing to pay. You expect to sell the stock in two years for $60 per share. The stock pays an annual dividend of $1.50 per share. If the required rate of return is 12.0%, which of the following equations best represents the maximum price you should pay for the stock?

Multiple Choice

  • PV = 1.50/(1.12) + 61.50/(1.12)2

  • PV = 1.50/(1.12)0 + 1.50/(1.12)1+ 60/(1.12)2

  • PV = 12/.15

  • PV = 12/(1.015) + 72/(1.015)2

  • PV = 1.50/(1.12) + 60/(1.12)2

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