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Knightmare, Inc., will pay a dividend of $6.45, $10.55, and $13.75 per share for each of...

Knightmare, Inc., will pay a dividend of $6.45, $10.55, and $13.75 per share for each of the next three years, respectively. The company will then close its doors. Investors require a return of 9.6 percent on the company's stock. What is the current stock price?

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Answer #1

current stock price=Future dividends*Present value of discounting factor(rate%,time period)

=6.45/1.096+10.55/1.096^2+13.75/1.096^3

which is equal to

=$25.11(Approx).

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