Question
Hi, I am reviewing for my final and can't quite figure out how to come to the answer on the following question: You expect a
Hi, I am reviewing for my final and can't quite figure out how to come to the answer on the following question:
You expect a stock to pay dividends of $1.00, $1.40, $1.65, $1.88 over the next 4 years. You will receive the first dividend exactly 1 year from now. You expect the stock to sell for a price of $77.50 four years from now. If the required return is 12%, what is the price of the stock today?
I answered it incorrectly. I thought I could just use the equation p0=d1/(r-g) I was wrong however. I am now reviewing this exact problem for tomorrow and still cannot figure it out. I am using the NPV function in excel and everything. I have come within a dollar of the correct answer but still cannot figure it out.
Thanks!
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