You are considering the purchase of Zee Company stock. You anticipate that the company will pay dividends of RM3.50 per share next year and RM4.00 per share the following year. You believe that you can sell the stock for RM20.00 per share two years from now. If your required rate of return is 10 percent, what is the maximum price that you would pay for a share of Zee Company stock
You are considering the purchase of Zee Company stock. You anticipate that the company will pay dividends of RM3.50 per share next year and RM4.00 per share the following year. You believe that you can sell the stock for RM20.00 per share two years from now. If your required rate of return is 10 percent, what is the maximum price that you would pay for a share of Zee Company stock
Related questions
You own 1,100 shares of stock in Avondale Corporation. You will receive a $2.00 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $75 per share. The required return on Avondale stock is 20 percent.
| Ignoring taxes, what is the current share price of your stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) |
| Share price | $ |
| If you would rather have equal dividends in each of the next two years, how many shares would you sell in one year? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) |
| Number of shares | $ |
| What would your cash flow be for each year for the next two years? Hint: Dividends will be in the form of an annuity. (Do not round intermediate calculations.) |
| Cash flow | $ |
