Stock problem, the solving processes are really necessary to me for applying ano

Question

Stock problem, the solving processes are really necessary to me for applying another problems, thanks!

(The correct answer is 47.19, and I just want to know the solving process)

Suppose the goddess tells you the following information about a stock: Year Dividend 1 $2 2 $2 3 $3 She also tells you that the stock will sell for $55 at three years from now If you require a 13% return to invest in this stock, what do you expect the price of the stock to be one year from now (P1)? Answer to 2 decimal places, for example 49.12.

Explanation / Answer

The price at the end of three year will be $ 55 Price at the end of 1 year :=55/((1+.13)^2)        43.07 (A) PV of dividend at the end of year 1 13% Dividend PV @ 13 % Year 2 2          1.77 year 3 3          2.35 PV of dividend          4.12 (B) Dividend of year 1 will not be considered for calculating PV at P(1) Therefore the value of share at P(1)        47.19 :=A + B

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