You planned to hold the stock for two years

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Reference no: EM131539370

Suppose Acap Corporation will pay a dividend of $2.86 per share at the end of this year, and $2.98 per share next year. You expect Acap's stock price to be $50.92 in two years. If Acap's equity cost of capital is 9.2%?:

a. What price would you be willing to pay for a share of Acap stock today, if you planned to hold the stock for two years? The price you would be willing to pay, if you planned to hold the stock for two years, is $ (Round to the nearest? cent.)

b. Suppose instead you plan to hold the stock for one year. What price would you expect to be able to sell a share of Acap stock for in one year? (Round to the nearest cent.)

c. Given your answer in part (b), what price would you be willing to pay for a share of Acap stock today, if you planned to hold the stock for one year? How does this compare to your answer in part (a)?

(Note: It is best not to round intermediate calculations - make sure to carry at least four decimal places in intermediate calculations.)

Reference no: EM131539370

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