Problem 6-9 Star Light & Power increases its dividend 3 percent per year every y

Question

Problem 6-9

Star Light & Power increases its dividend 3 percent per year every year. This utility is valued using a discount rate of 10 percent, and the stock currently sells for $53 per share. If you buy a share of stock today and hold on to it for at least three years, what do you expect the value of your dividend check to be three years from today? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Star Light & Power increases its dividend 3 percent per year every year. This utility is valued using a discount rate of 10 percent, and the stock currently sells for $53 per share. If you buy a share of stock today and hold on to it for at least three years, what do you expect the value of your dividend check to be three years from today? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

Star Light & Power increases its dividend 3 percent per year every year. This utility is valued using a discount rate of 10 percent, and the stock currently sells for $53 per share. If you buy a share of stock today and hold on to it for at least three years, what do you expect the value of your dividend check to be three years from today? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Expected Dividend next year = 53*(10%-3%) = 3.71

Expect the value of your dividend check to be three years from today = 3.71*1.03^2

Expect the value of your dividend check to be three years from today = 3.94

Answer

DIVIDEND $ 3.94

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.