Answer:
A.) $1.667
B.) $6.667
C.) $11.667
D.) $16.667
Explanation:
GIVEN ;
Rate of return(r) = 15% = 0.15
Calculate what the stock price should be today if:
A.) $0.25 constant annual dividend forever
Dividend = payment per period
Therefore,
Price = (payment per period ÷ rate)
Price = ($0.25 ÷ 0.15) = $1.667
B.)$1.00 constant annual dividend forever
Price = (payment per period ÷rate)
Price = ($1.00 ÷ 0.15) = $6.667
C.)$1.75 constant annual dividend forever
Price = (payment per period ÷rate)
Price =($1.75 ÷ 0.15) = $11.667
D.)$2.50 constant annual dividend forever
Price = (payment per period ÷rate)
Price = ($2.50 ÷ 0.15) = $16.67
