UNH Fury Inc. Holdings is expected to pay dividends of $2.89 every six months (first payment in 6 months) for the next three years. Assume semi-annual compounding. The current stock price is $23, and the equity cost of capital is 18%. Using the above information, what price would you expect UNH Furys stock to sell for in three years?

Hint: First, it will be helpful to set up a timeline. The value of the stock today is equal to the present value of all the future cash flows, which in this case, is dividends + a future sale price in year 3 which you are asked to find. Note that the dividend stream is an annuity. How many periods/what interest rate do you need? Note that equity cost of capital is conveniently expressed as an annual rate. The per-period rate is the 6-month rate. Given semi-annual compounding, we find the 6-month rate with the shortcut, APR/m. Finally, set up an equation for the price today. You should find there is only one missing variable (the price 3 years from now) which is what you need to solve for.