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XYZ, Inc. is expected to pay a dividend of $0.87 per share next year and $1.15...

XYZ, Inc. is expected to pay a dividend of $0.87 per share next year and $1.15 per share the year after that. At the end of the second year, the estimate value of the stock is $16.90. Your required return is 8.30%. What is your estimate of this stock’s current value using the dividend discount model? Give your response to two decimal places.

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Answer #1

Current value=Future dividends and value*Present value of discounting factor(rate%,time period)

=0.87/1.083+1.15/1.083^2+16.90/1.083^2

which is equal to

=$16.19(Approx).

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