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- 2013-8-21
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Can someone check this? QBank issue
When I plug in these inputs in my calculator I’m not getting the same answer. Can someone check on this and let me know if it’s just me making a mistake or if the QBank is wrong?
The following data pertains to a common stock:
It will pay no dividends for two years.
The dividend three years from now is expected to be $1.
Dividends are expected to grow at a 7% rate from that point onward.
If an investor requires a 17% return on this stock, what will they be willing to pay for this stock now?
A) $ 7.30.
B) $10.00.
C) $ 6.24.
Your answer: A was correct!
time line = $0 now; $0 in yr 1; $0 in yr 2; $1 in yr 3.
P2 = D3/(k g) = 1/(.17 .07) = $10
Note the math. The price is always one year before the dividend date.
Solve for the PV of $10 to be received in two years.
FV = 10; n = 2; i = 17; compute PV = $7.30 |
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发表于 2013-4-11 18:16
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