Answer:
$15.07
Explanation:
[tex]P4=\frac{D5}{(ke-g)}[/tex]
Where,
P4 is the price after 4 years
Ke is the required return = 15.00%
g is the growth rate = 3.5%
D5 is dividend at the end of year:
[tex]=Dividend\ per\ share\times(1+g)^{t}[/tex]
[tex]=1.46\times(1.035)^{5}[/tex]
= 1.7340
Therefore,
[tex]P4=\frac{1.7340}{(15\ percent-3.5\ percent)}[/tex]
[tex]P4=\frac{1.7340}{11.5\ percent}[/tex]
= $15.07
Hence, the price of this stock be in 4 years if investors require an annual return of 15 percent is $15.07.
