A stock is expected to pay no dividends for the next three years. At the end of

Question:

A stock is expected to pay no dividends for the next three years. At the end of year 4 stock it is expected to begin paying a constant dividend of $1 per share annually. Assume the stock’s betta is 1.2, the risk-free rate is 5%, an the market risk premium is 4%. Find the present value of the

a) 7.71

b) 7.02

c) 10.20

d) 9.14

e) 9.77

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...