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m is expected to pay a dividend of $2.45 next year and $2.60 the following year. Financial analysts believe the stock will be at their price target of $95 in two years. Compute the value of this stock with a required return of 12.4 percent.

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Tundexi

Answer:

$79.43

Explanation:

Year    Return        Amount($)  PV factor for 12.4%  Present Value

1         Dividend           2.45                0.890                   2.179715

2        Dividend            2.6                  0.792                   2.057978

2        Value of share   95                   0.792                   75.19535

          at end of tr 2

           TOTAL                                                                   $79.43304

Thus, the present value of share is $79.43

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