About the investment plan

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Reference no: EM131851973

The Goliath Inc. decides to pay the following dividends over the next three years: $2, $2.60, and $3.38. Thereafter, the company will maintain a constant 10% growth rate in dividends forever. The required return of Goliath’s stock is always 15%.

Suppose Victor has $1000 today. He decides to buy 10 shares of Goliath’s stock today and save the rest of his $1000 into the Whales Cargo bank, which provides an annual interest rate of 6%. Victor will sell his shares of Goliath’s stock in year 3 and withdraw the money from the bank as well. Victor wants to know how much money he can have in year 3, with such an investment plan.

What is the stock price (per share) of Goliath Inc. when Victor sells it in year 3 (immediately after the third dividend is paid out)?

Reference no: EM131851973

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