Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividen

Question

Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividend of $4 per share and has announced that it will increase the dividend by $5 per share for each of the next four years, and then never pay another dividend.

If you require a return of 12 percent on the company

Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividend of $4 per share and has announced that it will increase the dividend by $5 per share for each of the next four years, and then never pay another dividend.

Explanation / Answer

Hi,

Please find the answer as follows;

Stock Price = 9/(1+.12)^1 + 14/(1+.12)^2 + 19/(1+.12)^3 + 24/(1+.12)^4 = 47.972 or 47.97

Thanks.

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