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Diets For You announced today that it will begin paying annual dividends next year. The first dividend will be $0.12 a share. The following dividends will be $0.15, $0.20, $0.50, and $0.60 a share annually for the following 4 years, respectively. After that, dividends are projected to increase by 4 percent per year. How much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent?

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francocanacari

You will be willing to pay $ 1.41 to buy one share of this stock today if your desired rate of return is 8.5 percent.

Since Diets For You announced today that it will begin paying annual dividends next year, and the first dividend will be $ 0.12 a share, and the following dividends will be $ 0.15, $ 0.20, $ 0.50, and $ 0.60 a share annually for the following 4 years, After that, dividends are projected to increase by 4 percent per year, to determine how much are you willing to pay to buy one share of this stock today if your desired rate of return is 8.5 percent, the following calculation must be performed:

  • 8.5 = 0.12
  • 100 = X
  • 100 x 0.12 / 8.5 = X
  • 1.41 = X

Therefore, you will be willing to pay $ 1.41 to buy one share of this stock today if your desired rate of return is 8.5 percent.

Learn more about maths in https://brainly.com/question/25989093

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