This Question 1 pt 19 of 30 0 complete This Test 30 pts pos

This Question: 1 pt 19 of 30 (0 complete) This Test: 30 pts pos Question Help An investor plans to buy a share of stock today, which will be held for 1 year. The stock will pay a $1.85 dividend and should sell for $46. If the required return is 9%. how much should the investor pay for the stock? The investor should pay $ for the stock. (Round to the nearest cent.)

Solution

The investor should pay = (1.85 + 46)/1.09 = 43.90

Amount to be paid = 17.76

Discount rate	11.0000%
Cash flows	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
-	0	-	-
0.890	1	0.80	0.80
0.890	2	0.72	1.52
20.000	2	16.23	17.76