Smith Construction, Inc. just paid a $2.78 dividend. The dividend is expected to grow by 4% each year for the next three years. After that the company will never pay another dividend ever again. If your required return on the stock investment is 10%,what should the stock sell for today? A) $7.46
B) $28.91
C) $46.33
D) $15.63

A) $7.46

Explanation:

The computation of the stock sell for today is given below:

D1 = 2.78 × (1.04)

= 2.89

D2 = 2.89 × (1.04)

= 3.01

D3 = 3.01 × (1.04) = 3.13

Now the price of the stock is

= 2.89 ÷ (1.1) + 3.01 ÷ (1.1)^2 + 3.13 ÷ (1.1)^3

= $7.46

hence, the correct option is a.

The same should be considered and relevant

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi