1. How much would you pay for a share of stock paying a dividend(cash payout C) of $4 to be paid in one year, a known sellin

Question

3 years ago

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1. How much would you pay for a share of stock paying a dividend(cash payout C) of $4 to be paid in one year, a known sellin

g price in one year (P) of $50, and expected return (R) of similar assets of 2%?2. Compute the price of a share of stock that pays a$1.50 per year dividend and that you expect to be able to sell in one year for $20, assuming you require a 10% return.

Business

1 answer:

Mnenie [13.5K] · Answer 1 · 2022-03-23T08:37:16+03:00

Answer and Explanation:

The computation is shown below:

a. The willing to pay is

= (Current year price) ÷ (1 + rate) + (current year dividend) ÷ (1 + rate)\

= ($50) ÷ (1 + 0.02) + ($4) ÷ (1 + 0.02)

= $52.94

b. The price of a share is

= (Current year price) ÷ (1 + rate) + (current year dividend) ÷ (1 + rate)\

= ($20) ÷ (1 + 0.10) + ($1.50) ÷ (1 + 0.10)

= $19.55

We simply applied the above formula so that the correct value could come

And, the same is to be considered

1. How much would you pay for a share of stock paying a dividend​(cash payout ​C) of ​$4 to be paid in one​ year, a known sellin

1. How much would you pay for a share of stock paying a dividend(cash payout C) of $4 to be paid in one year, a known sellin