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Global Logistics just announced it is increasing its annual dividend to $1.88 next year and will increase that dividend by 1.85 percent annually thereafter. How much will one share of this stock be worth ten years from now if the required rate of return is 12.8 percent

Respuesta :

sadddamkashmiri801

Answer:

$20.25 per share

Explanation:

Using the Dividend valuation model, we can find the stock value using the following formula:

Po = Do * (1+g)^n  / (r-g)

Here

n =  10 years because we want future value of the stock after 10 years

g = 1.85%

Do = Dividend just paid

r = 12.8%

Po = Stock value

By putting values we have:

Po = 1.88 * (1+1.85%)^10  / (12.8% - 1.85%)

Po = $20.25 per share

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