Asonia Co will pay a dividend of 490 905 1190 and 1365 per s

Asonia Co. will pay a dividend of $4.90, $9.05, $11.90, and $13.65 per share for each of the next four years, respectively. The company will then close its doors. If investors require a return of 11.7 percent on the company\'s stock, what is the stock price?

$33.91

$42.31

$31.49

$35.90

$28.95

Solution

Current price=Future dividends*Present value of discounting factor(11.7%,time period)

=4.9/1.117+9.05/1.117^2+11.90/1.117^3+13.65/1.117^4

which is equal to

=$28.95(Approx).