Suppose Acap Corporation will pay a dividend of $$2\mathrm{.}80$ per share at the end of this year and a dividend

of$$3$ per share next year. You expect Acap's stock price to be $$52$ in two years. Assume that Acap's

equity cost of capital is $10\%.$

Complete the steps below using cell references to given data or previous calculations. In some cases, a

simple cell reference is all you need. To copy$/$paste a formula across a row or down a column, an

absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be

used, the directions will specify the use of that function. Do not type in numerical data into a cell or

function. Instead, make a reference to the cell in which the data is found. Make your computations only

in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance

of the data in your formulas, usually the Given Data section.

a$.$ What price would you be willing to pay for a share of Acap stock today, if you planned to hold

the stock for two years?

b$.$ Suppose instead you plan to hold the stock for one year. For what price would you expect to be

able to sell a share of Acap stock in one year?

$*$ Given your answer to $($b$),$ what price would you be willing to pay for a share of Acap stock today,

if you planned to hold the stock for one year? How does this price compare to your answer in $($a$)?$

Dividend in $1$ year $2\mathrm{.}80$

Dividend in $2$ years $ $3\mathrm{.}00$

Share price in $2$ years $ $52$

Equity cost of capital $10\%$

a$.$ What price would you be willing to pay for a share of Acap stock today, if you planned to hold

the stock for two years?

Holding period $($years$)$

Price per share

b$.$ Suppose instead you plan to hold the stock for one year. For what price would you expect to be

able to sell a share of Acap stock in one year?

Holding period $($years$)$

Price per share

Given your answer to $($b$),$ what price would you be willing to pay for a share of Acap stock today,

if you planned to hold the stock for one year? How does this price compare to your answer in $($a$)?$

Price per share

The price you would pay affected by the amount of time you hold the stock.