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natulia [17]
3 years ago
7

A stock paying $5 in annual dividends currently sells for $80 and has an expected return of 14%. What might investors expect to

pay for the stock one year from now after the next dividend has been paid
Business
1 answer:
Drupady [299]3 years ago
5 0

Answer:

$86.20

Explanation:

Total return from stock = Current price * expected return

Total return from stock = 80*14%

Total return from stock = $11.20

Dividend already realized = $5

Capital gain = $11.20 - $5

Capital gain = $6.20

End of one year price = Beginning price + capital gain

End of one year price = $80 + $6.20

End of one year price = $86.20

Therefore, at the end of one year price is $86.20

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