Question
The company ICA Gruppen will pay a dividend of 13 SEK per share at the end of this year and 14 kr per share next
The company ICA Gruppen will pay a dividend of 13 SEK per share at the end of this year and 14 kr per share next year. You expect that ICA Gruppen's stock price will be 540 SEK in two years. If their cost of equity is 11%
a. What price would you be willing to pay for one ICA Gruppen stock today, if you planned to hold the stock for two years? (answer with two decimals).
b. Suppose instead you plan to hold the stock for one year. What price would you expect to be able to sell a share of ICA Gruppen for in one year? (answer with two decimals).
c. Assume now that the price of ICA Gruppen in one year would be 420 SEK. Then what price would you be willing to pay for a share of ICA Gruppen's stock today, if you planned to hold the stock for one year? (answer with two decimals).
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