Question
What should be the current price of a stock that is expected to sell at $45 a year from now, pays a $5 dividend, and
What should be the current price of a stock that is expected to sell at $45 a year from now, pays a $5 dividend, and has an after-tax return of 20%? The tax rate on dividends is 40% and the tax rate on capital gains is 20%.
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To calculate the current price of the stock we can use the dividend discount model DDM The DDM is ba...
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
