Question

it has two questions

The company will then have a constant dividend of $1.80 forever. What is the Fey Fashions expects the following dividend pattern over the next seven years: stock's price today if an investor wants to earn a. 16%? b. 22%? a. What is the stock's price today if an investor wants to earn 16%? $ (Round to the nearest cent.) i Data Table - X (Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 $1.00 Year 2 $1.08 Year 3 $1.17 Year 4 $1.26 Year 5 $1.36 Year 6 $1.47 Year 7 $1.59 Print Done

Answer 1

a.

Stock Price = 1/(1.16) + 1.08/(1.16)² + 1.17/(1.16)³ + 1.26/(1.16)⁴ + 1.36/(1.16)⁵ + 1.47/(1.16)⁶ + 1.59/(1.16)⁷ + 1.80/(0.16)(1.16)⁷

Stock Price = $8.90

b.

Stock Price = 1/(1.22) + 1.08/(1.22)² + 1.17/(1.22)³ + 1.26/(1.22)⁴ + 1.36/(1.22)⁵ + 1.47/(1.22)⁶ + 1.59/(1.22)⁷ + 1.80/(0.22)(1.22)⁷

Stock Price = $6.14