Homework Answers
I ) The dividend at year 2023 will be $7.92
| Year | Dividend | ||
| 2020 | D0 | $ 5.00 | |
| 2021 | D1 | $ 6.00 | D0 x (1.20) |
| 2022 | D2 | $ 7.20 | D1 x (1.20) |
| 2023 | D3 | $ 7.92 | D2 x (1.10) |
II) Stock Price in 2022 = D3 / Ke - g = 7.92 / (0.30-.010) = $39.60
Stock Price in 2020 = D1/(1+ke)^ 1+ D2/(1+ke)^2 + P2020/(1+ke)^2
III) Stock Price in 2020 =6/(1.30)^ 1+ 7.20/(1.30)^2 + 39.60/(1.30)^2 = $32.31
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