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Assume it is January 1 , 2 0 2 4 . Merck Pharmaceuticals ( MRK ) is currently selling for $ 1 3 0 .

Assume it is January 1,2024. Merck Pharmaceuticals (MRK) is currently selling for $130. Dividends for 2024 are expected to be $3.08 per share. We expect that dividends in 2025 will be $3.28 and in 2026 they will be $3.50. We will be selling the stock at the end of 2026 and The Value Line predicts the price to be $160 per share at that time. Our required rate of return is 10%. Using the Discounted Cash Flow Model stock valuation formula (Value of stock = present value of future dividends + present value of price of stock when we plan to sell), calculate the present value of the future cash flows from this stock. Would you consider buying MRK?

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