3. Investors expect Microtech to pay the first dividend of $1.25 at the end of Year...
3. Investors expect Microtech to pay the first dividend of $1.25 at the end of Year 2. The dividend should grow at a rate of 8 percent per year during Years 3, 4, and 5. The stock can be sold for $42 at the end of Year 5. Determine the current market value of the company’s stock if the required rate of return is 12 percent.
$27.61 Please Show All Work
Homework Answers
Answer: $ 27.61
| Cash Flows | PV factor at 12 % | Present Values | |
| D1 | 0 | 0.89286 | $ 0 |
| D2 | $ 1.25 | 0.79719 | 1.00 |
| D3 | $ 1.25 ( 1.08) = $ 1.35 | 0.71178 | 0.96 |
| D4 | $ 1.35 ( 1.08) = $ 1.458 | 0.63552 | 0.93 |
| D5 | $ 1.458 ( 1.08)= 1.575 | 0.56743 | 0.89 |
| Sale price | $ 42 | 0.56743 | 23.83 |
| Present Value of the Stock | $ 27.61 |
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3. Investors expect Microtech to pay the first dividend of $1.25 at the end of Year...
4. Investors expect Microtech to pay the first dividend of $1.25 at the end of Year...
4. Investors expect Microtech to pay the first dividend of $1.25 at the end of Year 2. The dividend should grow at a rate of 8 percent per year during Years 3, 4, and 5. The stock can be sold for $42 at the end of Year 5. Determine the current market value of the company’s stock if the required rate of return is 12 percent. $27.61 Please show all work typed as I am on mobile
Investors expect Microtech to pay the first dividend of $1.25 at the end of Year 2....
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