You are trying to determine the fair price to pay for a share of JM Smucker....
You are trying to determine the fair price to pay for a share of JM Smucker. If you buy this stock, you plan to hold it for at least a year. At the end of the year, you expect to receive a dividend of $5.50 and to sell the stock for $154. The discount rate for JM Smucker stock is 16%. What should be the price of this stock today?
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$99.80 |
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$137.50 |
||
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$144.22 |
||
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$151.66 |
Homework Answers
Current value=Future dividend and value*Present value of discounting factor(rate%,time period)
=5.50/1.16+154/1.16
which is equal to
=$137.5
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