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Lelechka [254]
3 years ago
13

Brickhouse is expected to pay a dividend of $3.45 and $2.58 over the next two years, respectively. After that, the company is ex

pected to increase its annual dividend at 4.1 percent. What is the stock price today if the required return is 11.9 percent
Business
1 answer:
ICE Princess25 [194]3 years ago
5 0

Answer:

$32.6

Explanation:

Brickhouse is expected to pay a dividend of $3.45 and $2.58 over the next 2 years

The company is expected to increaser it's annual dividend at 4.1%

= 4.1/100

= 0.041

Required return is 11.9%

= 11.9/100

= 0.119

Therefore the stock price for today can be calculated as follows

= 2.58(1+0.041)/0.119-0.041

= 2.58(1.041)/0.078

= 2.6857/0.078

= 34.43

3.46/(1+0.119)+2.58/(1+0.119)^2+34.43/(1+0.119)^2

= 3.46/1.119+2.58/1.119^2+34.43/1.119^2

= 3.093+2.060+27.5

= 32.6

Hence the stock price for today is $32.6

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