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What is a fair price for one share today

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Reference no: EM132760042

Problem 1: XYZ Ltd last paid a dividend of $0.20 three years ago. Today the company announced they will resume paying dividends. The planned dividends are $0.65 in one year's time, $0.75 in two years' time, and thereafter dividends will increase by a constant rate of 3% p.a. indefinitely. If the required rate of return for XYZ is 12%, what is a fair price for one share today?

a. $0.58

b. $7.44

c. $8.33

d. $8.22

e. $8.02

Reference no: EM132760042

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