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iogann1982 [59]
3 years ago
8

Kelly Enterprises' stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.75%

per year. The required rate of return on the stock, rs, is 11.50%. What is the stock's expected price 5 years from now?
(A) $40.17
(B) $41.20
(C) $39.83
(D) $40.85
(E) $41.69
Business
1 answer:
olganol [36]3 years ago
3 0

Answer:

stock's expected price is $44.45

Explanation:

given data

currently sells = $35.25 per share

constant rate r = 4.75% per year = 0.0475

required rate of return = 11.50% = 0.1150

time t = 5 year

solution

we get here future value that is express as

future value = currently sells × (1+r)^{t}   ..................1

put her value we get

future value = $35.25 × (1+0.0475)^{5}  

future value = $44.45

so stock's expected price is $44.45

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