Answer: $ 117.59
Year | Expected Dividend | PV factor at 8.5 % | PV of dividends |
1 | 3.00 x 1.16 = 3.48 | 0.922 | $ 3.2086 |
2 | 3.00 x 1.16 2 = 4.04 | 0.849 | 3.4300 |
3 | 3.00 x 1.16 3 = 4.68 | 0.783 | 3.6644 |
4 | 3.00 x 1.16 4 = 5.43 | 0.722 | 3.9205 |
$ 14.2235 |
PV at the end of Year 4 = 5.43 x 1.05 / ( 0.085 - 0.05 ) = 5.7015 / 0.035 = 162.90
P0 = 162.90 x 0.722 = $ 117.59
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