## Answers

This answer is corrected. The original approach and equation listed were correct. I mistyped one of the sign when ientered it in my calculator and thats why i got the wrong final number. Here it is again, but corrected.

where i is the rate of return and g is the annual growth rate

That is the general equation to a set dividend one year from now that grows at a certain rate. We will have to use a slightly more complex model.

Price = PV of first dividend + PV of second dividend + PV of third dividend + PV of fourth dividend + PV of all future divididends growing at arate of 4.4% =

You would be willing to pay $5.56

The first 4 terms are simple present values of future payments.

The last term is the present value of the stock according to the next dividend(which increased by 4.4% from the previous year) discounted back to time zero.

.where i is the rate of return and g is the annual growth rate

That is the general equation to a set dividend one year from now that grows at a certain rate. We will have to use a slightly more complex model.

The first 4 terms are simple present values of future payments. The last term is the present value of the stock according to the next dividend(which increased by 4.4% from the previous year) discounted back to time zero.

.