Question
Suppose that you own 100 shares of Video Technical (VT) stock. Currently, analysts predict that VT will pay its first semiannual common stock dividend of
Suppose that you own 100 shares of Video Technical (VT) stock. Currently, analysts predict that VT will pay its first semiannual common stock dividend of $0.35 per share six months from now. They expect this semiannual dividend to remain the same for ten and one-half years. After the 21st semiannual dividend payment, dividends will exhibit a more normal growth rate of 1.5% every six months indefinitely. Investors require an 11% annual rate of return, compounded semiannually, on VT's common stock.
a. The price of 100 shares of VC common stock at the end of the 10th year.
b. The price of 100 shares of VC common stock at the end of the fifth year.
c. The price of 100 shares of VC common stock today.
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