Assume that you plan to buy a share of XYZ stock today and to hold it for 2 years Your expectations are that you will not receive a dividend at the end of Year 1, but you will receive a dividend of $9 25 at the end of Year 2 In addition, you expect to sell the stock for $150 at the end of Year 2 If...

Computation of the Stock price today Given in ...

Assume that you plan to buy a share of XYZ stock today and to hold it for

Question:

Assume that you plan to buy a share of XYZ stock today and to hold it for 2 years. Your expectations are that you will not receive a at the end of Year 1, but you will receive a of $9.25 at the end of Year 2. In addition, you expect to sell the stock for $150 at the end of Year 2. If your expected rate of return is 16 percent, how much should you be willing to pay for this stock today?

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...