Answer:
(a) price stock need = $1.667
(b) price stock need = $6.667
(c) price stock need = $11.667
(d) price stock need = $16.667
Explanation:
given data
return = 15% = 0.15
to find out
what price would the stock need to be priced today
a. $0.25 constant annual dividend forever?
b. $1.00 constant annual dividend forever?
c. $1.75 constant annual dividend forever?
d. $2.50 constant annual dividend forever ?
solution
(a) price stock need = [tex]\frac{0.25}{0.15}[/tex]
(a) price stock need = $1.667
(b) price stock need = [tex]\frac{1.00}{0.15}[/tex]
(b) price stock need = $6.667
(c) price stock need = [tex]\frac{1.75}{0.15}[/tex]
(c) price stock need = $11.667
(d) price stock need = [tex]\frac{2.50}{0.15}[/tex]
(d) price stock need = $16.667
