Question
You are considering purchasing stock of the Uuge Corporation. Your research leads you to believe that the company will pay dividends as follows: next year
You are considering purchasing stock of the Uuge Corporation. Your research leads you to believe that the
company will pay dividends as follows: next year the company will not pay a dividend, the year following, the
company will pay $1.50/share dividend, the year following that, the company will pay a $2.00/share dividend
and beginning in year 4, the company will increase dividends by 3%/year over each preceding year. Since there
is substantial uncertainty regarding the dividends to be paid, you believe that a 23% rate of return is appropriate
for this investment. Based on this information, what is the maximum per share price you would pay for this
stock? You may use the template below to formulate your answer:
USE THE TEMPLATE ONLY!
Year | TYPE | CASH FLOW | PV FACTOR of 23% | PV |
Total |
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