I've came across a problem like this:
A stock is expected to pay a dividend of $1.50 at the end of each of the next three years. At the end of three years the stock price is expected to be $25. The equity discount rate is 16 percent. What
is the current stock price?
Can anyone suggest a solution? It be best to show the steps, thanks.
I calulated by solving:
1.5/(1.16)^1+1.5/(1.16)^2+1.5/(1.16)^3+25/(1.16)^3=19.39
Can anyone tell me if this is the correct way to solve for this problem?
A stock is expected to pay a dividend of $1.50 at the end of each of the next three years. At the end of three years the stock price is expected to be $25. The equity discount rate is 16 percent. What
is the current stock price?
Can anyone suggest a solution? It be best to show the steps, thanks.
I calulated by solving:
1.5/(1.16)^1+1.5/(1.16)^2+1.5/(1.16)^3+25/(1.16)^3=19.39
Can anyone tell me if this is the correct way to solve for this problem?