Berkeley, Inc. just paid an annual dividend of $2.60 per share on its
QUESTION
Berkeley, Inc. just paid an annual dividend of $2.60 per share on its stock. The dividends are expected to grow at a constant rate of 4.5 percent per year, indefinitely. If investors require an 11 percent return on this stock, what will the price be in 12 years?
ion asks what the price of this stock will be in 12 years, so you will need to use the time value of money equations. To find future value, keep in mind the formula: FV = PV(1 R)^t. FV is future value; PV is present value; R is required rate of return; and t is number of periods. Finally, plug in 41.8 for PV, .11 for R, and 12 for t. After you solve for FV, you should get $88.996 as your answer.
ANSWER:
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