Question
1) Suppose that a stock is expected to pay a $1 dividend at the end of this year and that your required return on equity
1) Suppose that a stock is expected to pay a $1 dividend at the end of this year and that your required return on equity investments is 8%. Using a one-period model of stock price determination, if you expect to sell a stock you buy today a year later for $1 you will be willing to pay for the stock the amount ?
2. Using the one-period valuation model of stock prices, if a share of stock pays an annual dividend of $4, you require a 13% return on equity investments, and if you believe that you can sell the stock next year for $50, then you would be willing to pay for the stock the amount ?.
3) Using the one-period model of stock price determination, at what price should a stock sell for if the required return on equity investments is 8%, the stock pays a dividend of $0.50 next year, and the stock is expected to sell next year for $30?
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