Luxury Yacht Co. just paid a dividend of $4.20. However, due to the current economic climate, they announced that dividends at that level will be unsustainable and that dividends will decrease by 20% each year for the next three years after which they will remain at a constant amount. If the required return is 15%, what is the price of the stock following this announcement?

Answer rating: 100% (QA)

To calculate the price of the stock following the announcement of decreasing dividends we need to de... View the full answer