The current price of a stock is 5319 If dividends are expect

The current price of a stock is $53.19. If dividends are expected to be $0.80 per share for the next five years, and the required return is 7%, then what should the price of the stock be in 5 years when you plan to sell it?

The price 5 years from now will be $?. (Round your response to the nearest dollar.)

Solution

Calculation of price of share 5 years from now Year Cash flow Future Value factor @ 7% Future Value 0 $53.19    1.40255 $74.60 1 $0.80    1.31080 $1.05 2 $0.80    1.22504 $0.98 3 $0.80    1.14490 $0.92 4 $0.80    1.07000 $0.86 5 $0.80    1.00000 $0.80 Price of share 5 years from now $79.20