Elaine's Vegetable Market currently plays a $1.50 common stock dividend. Robert is considering an investment in Elaine's Vegetable Market and plans to hold the stock for three years at which time he expects to sell the stock for $50.00. Robert expects the dividend to increase to $2.00 one year from now $2.75 in two years $3.75 in three years. What is the current value of Elaine's Vegetable Market common stock to Robert if he requires a 12% rate of return?
Elaine's Vegetable Market currently plays a $1.50 common stock dividend. Robert is considering an investment in Elaine's Vegetable Market and plans to hold the stock for three years at which time he expects to sell the stock for $50.00. Robert expects the dividend to increase to $2.00 one year from now $2.75 in two years $3.75 in three years. What is the current value of Elaine's Vegetable Market common stock to Robert if he requires a 12% rate of return?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Elaine's Vegetable Market currently plays a $1.50 common stock dividend. Robert is considering an investment in Elaine's Vegetable Market and plans to hold the stock for three years at which time he expects to sell the stock for $50.00. Robert expects the dividend to increase to $2.00 one year from now $2.75 in two years $3.75 in three years. What is the current value of Elaine's Vegetable Market common stock to Robert if he requires a 12%
Dividend | $0.00 | ||||||
Return on Investment | 0.00% | ||||||
Annual | |||||||
Growth | Selling | Current | Sum of | ||||
Year | Rate | Dividend | Price | Value | Dividends | ||
0 | 0.00% | $0.00 | #DIV/0! | ||||
1 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 | ||
2 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 | ||
3 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 | ||
4 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 | ||
5 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 | ||
6 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 | ||
7 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 | ||
8 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 | ||
9 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 | ||
10 | 0.00% | $0.00 | #DIV/0! | #DIV/0! | $0.00 |
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