Question

The current price of Wilis. Inc. common stock is $40 per share. You plan on buying...

The current price of Wilis. Inc. common stock is $40 per share. You plan on buying it today, holding it for 4 years, and then selling it. You anticipate receiving a dividend per share of $2.00 two years year from today, $2.50 three years from today and $3.00 four years from today. If you want to earn 12% on your investment, what price must you receive when you sell the stock four years from today?

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Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

A B C D Current price of Stock $40.00 Year 1 Dividend $0.00 $2.00 $2.50 $3.00 4 L Required return 12% Present value of Divide

Cell reference -

AB Current price of Stock 40 Year Dividend 1 2 3 o 2 2.5 moro FM Required return 0.12 Present value of Dividends =NPV(C10,C5:

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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