How much would they be willing to pay today

Reference no: EM13268975

A stock will pay $5 dividend per share at the end of the first quarter (quarter 1). Future dividends are supposed to be growing at a constant rate of 1%, so $5*(1+1%) at the end of the second quarter, $5*(1+1%)2 at the end of the third quarter, and so on. Suppose shareholders use a discount rate of 3% per quarter. How much would they be willing to pay today (quarter 0) for this stock (i.e, for receiving this stream of dividend payments)?

a. $142.86
b. $333.34
c. $233.64
d. $250

Reference no: EM13268975

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