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A stock is expected to pay the following dividends per share over the next three years,...

A stock is expected to pay the following dividends per share over the next three years, respectively: $1.50, $1.95 and $2.20. If you expect to be able to sell the stock for $54.26 in three years and your required rate of return is 8%, what is the most that you should be willing to pay for a share of this stock today?

no excel handwork only

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Answer #1

Value today=Future dividend and value*Present value of discounting factor(rate%,time period)

=1.50/1.08+1.95/1.08^2+2.20/1.08^3+54.26/1.08^3

which is equal to

=$47.88(Approx).

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