ABC co. is offering common stocks during the Covid. 19 pandemic which has created uncertainty in the capital market. In order to attract the potential buyers the firm pledges to pay $5 semiannual dividend for first 2 years followed by $1 quarterly dividend for next year and $2 annual dividend thereafter for indefinite time period. Suppose if required rate of return is expected to be 10 percent for first three years, 12 percent for next one years and 7 percent thereafter. What amount you must pay to purchase this stock?

Answer rating: 100% (QA)

To calculate the present value of the stock we need to find the present value of all expected future ... View the full answer