Compute the price of a share of stock that pays a 100 per ye

Compute the price of a share of stock that pays a $1.00 per year dividend and that you expect to be able to sell in one year for $25, assuming you require a 5% return. The price of the share is $? (Round your response to the nearest penny.)

Solution

Present value of share=Future income*Present value of discounting factor(5%,time period)

=1/1.05+25/1.05

which is equal to

=$24.76(Approx).