The Green Leaf Co pays a constant annual dividend of 240 a s

The Green Leaf Co. pays a constant annual dividend of $2.40 a share. The company announced today that it will continue to pay the annual dividend for the next 2 years, but afterwards they will no onger pay dividends. If the required annual rate of return is 8.0 percent, what is this stock worth today? Assume the next dividend is in one year O $4.28 O $6.68 $2.59 O $2.70 O $4.80

Solution

Worth of the stock today = 4.28

Discount rate	8.0000%
Cash flows	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
-	0	-	-
2.400	1	2.22	2.22
2.400	2	2.06	4.28