A stock is expected to pay a dividend of $1.50 at the end of each of the next three years. At the end of three years the stock price is expected to be $25. The equity discount rate is 16 percent. What is the current stock price? A) $17.18. B) $19.39. C) $24.92. D) $18.90. Your answer: A was incorrect. The correct answer was B) $19.39. The value of the stock today is the present value of the dividends and the expected stock price, discounted at the equity discount rate: $1.50/1.16 + $1.50/1.162 + $1.50/1.163 + $25.00/1.163 = $19.39 MY QUESTION IS: IS THERE ANOTHER WAY TO FIGURE OUT WHAT THE CURRENT STOCK PRICE IS?
Enter PMT = $1.5, FV=$25, i=16%, and n=3. Then press PV.
dreary, thank you