Question

Sample Problems on Stock V X Course Hero x Homework on the second € -> c e e zto.mheducation.com/hr.tpx E connect FINANCE Finance 320 Day Section 2:10 -3:30 2019 Tue Theme signment from Chapter Eight Question 6 of 10) 10.00 points Maloney, Inc., has an odd dividend policy. The company has just paid a dividend of $4 per share and has announced that it will increase the dividend by S6 por share for each of the next five years, and then never pay another dividend. If you require a return of 14 percent on the company's stock, how much will you pay for a share today? (Do not round Intermediate calculations and round your answer to 2 decimal places,... 32. 16.) Current share price References eBook & Resources Worksheet Learning Objective: 08-01 How stock prices depend on future dividends and dividend growth Section: 8.1 Common Stock Valuation Difficulty: Intermediate Chank my work

Answer 1

The price of the share = present value of all the future dividends.

The dividend is increased by $6 per share for each of the next 5 years.

So the next 5 years dividend are 10,16,22,28,34.

The required rate of return =14%

The price of the share =$70.17
(Refer notes attached).

PS 10 4 +- 28 -1434 34 (11435 (-4)2 (114,3' *1433 P=$70.17