Question: Using formula PVIF = 1/(1+r)nCurrent Price = D*(1+r) + D* (1/1+r)2+ D* (1/1+r)3+P* (1/1+r)31233a.D= Dividend in year 1 =0.25 *(1+.17)1b.D= Dividend in year 2 =0.25

Using formula PVIF = 1/(1+r)nCurrent Price = D*(1+r) + D* (1/1+r)2+ D* (1/1+r)3+P* (1/1+r)31233a.D= Dividend in year 1 =0.25 *(1+.17)1b.D= Dividend in year 2 =0.25 *(1+.17)22c.D= Dividend in year 3 =0.25 *(1+.17)33d.P= Price Value of share in year 33i.Let the Current Price be Xii.So P=X*(1.6)=> 1.6X3Now Solving above equation for Xa.X =0.25 + 0.25 + 0.25 + 0.998993Xb.X - 0.998993X = 0.75c.0.00100711X = 0.75d.X = 0.75/0.00100711e.X = $744.71

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