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Star Light & Power increases its dividend 2.2 percent per year every year. This utility is valued using a discount rate of 9 percent, and the stock currently sells for $45 per share. If you buy a share of stock today and hold on to it for at least three years, what do you expect the value of your dividend check to be three years from today?

Respuesta :

Tundexi

Answer:

$3.20

Explanation:

P0 = D1/(r-g)

P0 = $45

r = 9% = 0.09

g = 2.2% = 0.022

$45 = D1 / (0.09 - 0.022)

D1 = $45*0.068

D1 = 3.06

The dividend in 1 year = $3.06

Hence, The dividend in 3 years = D1*(1+g)*(1+g)

D3 = $3.06*(1.022)*(1.022)

D3 = 3.19612104

D3 = $3.20

The dividend in 3 years = $3.20

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