The current price of a stock is $50 and you plan to sell it in two years. If dividends are expected to be $1 per share for the next two years, and the required return is 5%, what should the price of the stock be when you sell it?
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Answer:
55.125
Explanation:
5% of 50 is 2.5
after one year stock price 52.5
5% of 52.5 is 2.625
after 2 years 52.5+2.625= 55.125
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