#10 o Sprint * 28% 5:49 PM ezto.mheducation.com Question 10 of 0 points 10.00 po

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#10 o Sprint * 28% 5:49 PM ezto.mheducation.com Question 10 of 0 points 10.00 points Problem 7-19 Nonconstant Growth (LO2) You expect a share of stock to pay dividends of $1.30, $1.55, and $1.60 in each of the next 3 years. You believe the stock will sell for $22 at the end of the third year. What is the stock price if the discount rate for the stock is 20%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price b. What is the dividend yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Dividend yield 0% Hints References Bok & Resources Hinte1 Check mywrk

Explanation / Answer

Stock price:

= $1.30×(1+20%)^-1+$1.55×(1+20%)^-2+$1.60×(1+20%)^-3+$22×(1+20%)^-3

= $15.82

Dividend yield:

= [$1.30×(1+20%)^-1+$1.55×(1+20%)^-2+$1.60×(1+20%)^-3]÷$15.82

= 19.50%

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