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QUESTION 8: Josee Fernandes owns 1000 shares of Axiom Limited, a multinational fertilizer company. Josee would like to remain invested in Axiom for 3 years.

QUESTION 8:

Josee Fernandes owns 1000 shares of Axiom Limited, a multinational fertilizer company. Josee would like to remain invested in Axiom for 3 years. Axiom will pay a $5 per share dividend one year from today, $4 two years from today, and after that dividends will decline at 2% per year forever. The required rate of return on Muirga stock is 8%.

a. What is the current price of the stock?

b. Suppose Josee prefers to receive $6,000 dividend per year for the next three years. How can she accomplish this? What will be the value of her portfolio after 3 years?

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