Ac electric just paid a $2.10 per share annual dividend. the firm pledges to increase its dividend by 2.4 percent for the next 5 years and then maintain a constant 2 percent rate of dividend growth. if the required return is 15 percent, what is the current value of one share of this stock?

$16.74

Explanation:

First , find the dividend per year;

D1 = 2.10(1.0.24) = 2.1504

D2 = 2.1504(1.024) = 2.2020

D3 = 2.2020(1.024) = 2.2548

D4 = 2.2548(1.024) = 2.3089

D5 = 2.3089(1.024) = 2.3643

D6 = 2.3643(1.02) = 2.4116

Next, find the present value of the dividends;

PV (of D1) = 2.1504/ 1.15 = 1.8699

PV (of D2) = 2.2020/ 1.15² = 1.6650

PV (of D3) = 2.2548/ 1.15³ = 1.4826

PV (of D4) = 2.3089/ (1.15^4) = 1.3201

PV (of D5) = 2.3643/ (1.15^5) = 1.1755

PV (of D6 onwards)

PV (of D6 onwards) = 9.2228

Next, sum up the PVs to find the price of the stock;

= 1.8699 + 1.6650 + 1.4826 + 1.3201 + 1.1755 + 9.2228

= 16.7359

Therefore the value of one share is $16.74

forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.

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explanation: