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NEW QUESTION: 1
Given that a stock is correctly priced at $29.34, has an expected dividend payment of $1.30 in one year, and has a required rate of return of 18%, what should its price be right after that dividend payment in one year?
A. $33.32
B. $37.74
C. Not enough information
D. $29.41
E. $35.68
F. $34.95
Answer: A
Explanation:
Explanation/Reference:
Explanation:
In order for the stock to be correctly priced, the present value of next year's dividend plus the present value of the stock price right after the dividend must equal the current price. In this question, 29.34 = (1.3 / 1.18)
+ (next year's price / 1.18). Rearranging this yields next year's price = [29.34 - (1.3/1.18)] x 1.18 = $33.32.
NEW QUESTION: 2
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Explanation:
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NEW QUESTION: 3
A. Option B
B. Option C
C. Option A
D. Option D
Answer: B
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