You expect a share of stock to pay dividends of $1.90, $2.15, and $2.40 in each of the next 3 years. You

You expect a share of stock to pay dividends of $1.90, $2.15, and $2.40 in each of the next 3 years. You believe the stock will sell for $31 at the end of the third year.

a.	What is the stock price if the discount rate for the stock is 10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Stock price

$

b.	What is the dividend yield? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Dividend yield

%

Explanation:

Some values below may show as rounded for display purposes, though unrounded numbers should be used for the actual calculations.

a.

P0	=	$1.90	+	$2.15	+	$2.40 + $31	=	$28.60
		1.10		(1.10)2		(1.10)3

b.

DIV1/P0 = $1.90/$28.60 = 0.0664 = 6.64%