Question

 The Jackson-Timberlake Wardrobe Co. just paid a dividend of $2.15 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. Investors require a return of 10.5 percent on the company's stock.

 a. What is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

 b. What will the stock price be in 3 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

 c. What will the stock price be in 15 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

D1= D0(1+G)ⁿ

D1= 2.15(1+0.04)¹

D1= 2.236

D4= 2.15(1+0.04)⁴

D4= 2.515195904

D16= 2.15(1+0.04)¹⁶

D16= 4.02690967816

Answer A)

Stock Price today

= $ 34.4

Answer B)

Stock Price in 3 years

= $ 38.69

Answer C)

Stock Price in 16 years

= $ 61.95

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