Question

Hi need help on this question! thanks for your time(will give review)!

Analysts expect Marble Comics to pay shareholders $1.45 per share annually for the next 3 years. After that, the dividend will be $1.81 annually forever. Given a discount rate of 3%, what is the value of the stock today? Select one: a. $60.97 b. $64.43 c. $4.10 d. $59.32 e. $64.68

Answer 1

D1 = $1.45
D2 = $1.45
D3 = $1.45

P0 = (D1 / (1+r)) + (D2 / (1 + r)^2) + (D3 / (1+r)^3)

= ($1.45 / 1.03) + ($1.45 / 1.03^2) + ($1.45 / 1.03^3)

= $4.10

Current price of stock =$4.10