National warehousing just announced it is increasin its annu

National warehousing just announced it is increasin its annual dividend to 1.18 next year and establishing a policy whereby th dividend will increase by 3.25 percent annually tthereafter. how much will one share of this stock be worth 8 years from now if the required rate of return is 9.5 percent.

Solution

Price of the share today = 1.18/(0.095-0.0325)= $18.88 Price of the stock in 8 years = 18.88*(1.0325)^8= $24.38