Count Present Value of the stock X. Expected rate on return of the same risk stock equals 10 %. You expect salling price of the stock in 6 years from now 2250 czk (exactly after the 6th dividend will have been paid out). The last dividend that has been paid out equals 100 czk/share. The last dividend was paid out yesterday and the following one will be paid out exactly in one year. Since now you expect growth rate of the dividends 5,5 % a year for following 6 years.

A) Is it farouble to buy the stock for 1500 czk now and why?

B) Would your recommendation change, if the price in 6th year is 1900, the dividend growth rate is 6 % and the expected rate on return of the stock with the same sensitivity to systematic risk equals 9 %? How and why?

Answer rating: 100% (QA)

A To determine whether it is favorable to buy the stock for 1500 czk now we need to calculate the pr... View the full answer