liguria inc

Finance Jan 13, 2021

liguria inc. just paid a dividend of $4 per share and has announced that it will increase its dividend by $2 per share for each ofthe next 4 years. and it will never pay another dividend. if the required return is 10.2 percent, what will a share of stock sell for today

Expert Solution

D1 = ($4 + $2) = $6

D2 = ($6 + $2) = $8

D3 = ($8 + $2) = $10

D4 = ($10 + $2) = $12

Required return = 10.20%

Share of stock sell for today = [$6 / (1.102)¹] + [$8 / (1.102)²] + [$10 / (1.102)³] + [$12 / (1.102)⁴]

Share of stock sell for today = [$5.445 + $6.588 + $7.472 + $8.137]

Share of stock sell for today = $27.64

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