Hetfield and Ulrich, Inc., has an odd dividend policy. The company has just paid a dividend of

Question:

Hetfield and Ulrich, Inc., has an odd dividend policy. The company has just paid a dividend of $7 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 14 percent return on the company’s stock, how much will you pay for a share 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...