Answer:
$55.134
Explanation:
Given
dividend paid on its stock = $8.25
Duration is next 13 years
P0 = dividend on its stock × (PVIFA of return on this stock,years)
Remember PVIF = (1 - (1 + r)^-n)/r
Where PVIFA = present value interest factor of annuity
r = interest rate per period
n = number of periods
Therefore
P0 = $8.25 × (PVIFA11.2%,13)
P0 = $55.134
Answer:
$54.99
Explanation:
D = $8.25
R = 11.25
n =13
Perpetuity Formula is to be used
P0 = sum of discounted dividends
=D/1+r ^n =8.25/(1.1125)^1+8.25/(1.1125)^2+8.25/(1.1125)^3+8.25/(1.1125)^4+8.25/(1.1125)^5+8.25/(1.1125)^6+8.25/(1.1125)^7+8.25/(1.1125)^8+8.25/(1.1125)^9+8.25/(1.1125)^10+8.25/(1.1125)^11+8.25/(1.1125)^12+8.25/(1.1125)^13
=$54.99
