5. Renew It, Inc, is preparing to pay its first dividend. It is going to pay $0.45, $0.60, and $1 a share over the next three years, respectively. After that, the company has stated that the annual dividend will be $1.25 per share indefinitely. What is this stock worth to you per share if you demand a 10.8 percent rate of return on stocks of this type

$10.14

Explanation:

We need to first find the perpetual stock's worth after 3 years.

The formula would be:

Where

P is price of stock

D is the indefinite dividend worth

r is the rate of return you want

So, it will be:

Now, we want the stock's worth (in total) for the scenario:

The formula would be:

So, we take individual 3 years, remembering to add the P_3 to the last year (Year 3).

So, we have:

The stock is worth $10.14

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