Allison is the CEO of a large consumer products company. She asks the marketing research department to gather information to hel
1 answer:
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Answer:
$190.64
Explanation:
Data provided in the question:
Current selling price of shares = $180 per share
Dividend paid = $10.18
Expected growth rate, g = 6% = 0.06
Required rate of return, r = 12% = 0.12
Now,
The dividend for the following year to the next year, D1 = $10.18 × (1 + g)ⁿ
here, n = 2 ( i.e the duration of next year and the following year )
thus,
D1 = $10.18 × (1 + 0.06)²
or
D1 = $11.438
Therefore,
Price of stock one year from now =
=
= 190.637 ≈ $190.64