The most that we will be willing to pay for the stock is computed as shown below:
Dividend at end of year 1 is computed as follows:
= $ 3 + 10%
= $ 3.30
Dividend at end of year 2 is computed as follows:
= $ 3.30 + 10%
= $ 3.63
Dividend at end of year 3 is computed as follows:
= $ 3.63 + 5%
= $ 3.8115
Dividend at end of year 4 is computed as follows:
= $ 3.8115 + 5%
= $ 4.002075
Dividend at end of year 5 is computed as follows:
= $ 4.002075 + 5%
= $ 4.20217875
Dividend at end of year 6 is computed as follows:
= $ 4.20217875 + 3%
= $ 4.328244113
So the price of the stock will be as follows:
= $ 3.30 / 1.16 + $ 3.63 / 1.162 + $ 3.8115 / 1.163 + $ 4.002075 / 1.164 + $ 4.20217875 / 1.165 + 1 / 1.165 x [ ( $ 4.328244113 / ( 0.16 - 0.03 ) ]
= $ 28.047 Approximately
Feel free to ask in case of any query relating to this question
12YOU are con sidering buying stock in HUANG, INC, a San Angelo company that provides PPO...
You are considering buying stock in HUANG. , San Angel company that provides PPO medical services. The cand per year for the following the years as competitors enter the market and finally sew to a 3 per year of growth the to pay for a share of HUANG' Stock? 1.712 i d o e was 8.00 and is expected to increase by 10 that of the economy over you require a 16 per year for two Growth will then slow...