Question
Niven Rings Inc. just paid a regular dividend of $1.50 per share. The regular dividend is expected to grow at a rate of 10 percent
Niven Rings Inc. just paid a regular dividend of $1.50 per share. The regular dividend is expected to grow at a rate of 10 percent per year for the next three years, at a rate of 7 percent per year for the next two years, and after that at a rate of 4 percent per year forever. In addition to the regular dividend, Niven Rings is expected to pay a special dividend of $5.00 at the end of year 2. (NOTE: A special dividend is a one time only payment that will not recur. It is not considered in calculating the amount of future dividends). The appropriate discount rate is 14 percent per year. What is the price of the stock?
a. $19.02
b. $21.67
c. $22.13
d. $22.86
e. $24.36
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started