EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 7, Problem 18P
Summary Introduction
To determine: Value of share of a stock.
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The VSE Corporation currently pays no dividend because of depressed earnings. A recent change in management promises a brighter future. Investors expect VSE to pay a dividend of $1.5 next year (the end of year 1). This dividend is expected to increase to $2.75 the following year and to grow at a rate of 13 percent per annum for the following 2 years (years 3 and 4). Chuck Brown, a new investor, expects the price of the stock to increase 55 percent in value between now (time zero) and the end of year 3. If Brown plans to hold the stock for 2 years and requires a rate of return of 17 percent on his investment, what value would he place on the stock today? Use Table II to answer the question. Do not round intermediate calculations. Round your answer to the nearest cent.
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Chapter 7 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
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