4. Diets For You announced today that it will begin paying annual dividends next year.
The first dividend will be $1.25 a share. The following dividends will be $0.25, $0.25,
$0.50, and $0.75 a share annually for the following 4 years, respectively. At the end of
the fifth year, the stock could be sold for $18. How much are you willing to pay to buy
one share of this stock today if your desired rate of return is 8.5 percent?
$14.39 Please Show All Work.
The price we are willing to pay for stock is nothing but the present value of dividends
present value= dividend/(1+required return)^n
=(1.25/((1+8.5%)^1))+(0.25/((1+8.5%)^2))+(0.25/((1+8.5%)^3))+(0.5/((1+8.5%)^4))+((0.75+18)/((1+8.5%)^5))
=14.39
4. Diets For You announced today that it will begin paying annual dividends next year. The...
Diets For You announced today that it will begin paying annual dividends next year. The first dividend will be $1.25 a share. The following dividends will be $0.25, $0.25, $0.50, and $0.75 a share annually for the following 4 years, respectively. At the end of the fifth year, the stock could be sold for $18. How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent? $14.39...
Diets For You announced today that it will begin paying annual dividends next year. The first dividend will be $1.25 a share. The following dividends will be $0.25, $0.25, $0.50, and $0.75 a share annually for the following 4 years, respectively. At the end of the fifth year, the stock could be sold for $18. How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent? Please...
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