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What is the most you will pay for this stock

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Reference no: EM132972229

Question - Assume you are considering a stock which oddly pays a dividend at the end of each year. Your required rate of return is 8.5%. The expected dividend at the end of year 1 is $5.50. In year 2, the dividend is expected to grow by 11%. The year after that, the dividend is expected to be up 12%. In year 4 and 5 it is expected to grow at 15%.

Required -

If your holding period for this stock is 5 years, what is the present value of dividends?

If stock price is currently $40 and is expected to go to $80 by year 5, what is the present value of the stock?

If, as an investor, you only want to purchase stocks when Mr. Market sells them at 60% of intrinsic value, then what is the most you will pay for this stock?

Reference no: EM132972229

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