Todays date is March 30, 2012. E-Pay, Inc., stock pays a dividend every year on March 29.

Question:

Today’s date is March 30, 2012. E-Pay, Inc., stock pays a dividend every year on March 29. The most recent dividend was $1.50 per share. You expect the company’s dividends to increase at a rate of 25 % per year through March 29, 2015. After that, you expect that dividends will increase at 5 % per year. Investors require a 14 % return on E-Pay stock. Calculate the price of the stock on the following dates: March 30, 2012; March 30, 2016; and September 30, 2013.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...