Valorous Corporation will pay a dividend of $1.75 per share at this year's end and a dividend of $2.35 per share at the end of next year. It is expected that the price of Valorous' stock will be $41 per share after two years. If Valorous has an equity cost of capital of 9%, what is the maximum price that a prudent investor would be willing to pay for a share of Valorous stock today?

Explanation:

Assuming that today is the first day of the year, you wil receive, per share:

That is the present value of that stream of cash flow, which is calculated discounting each cash flow at a rate equal to the cost of capital of 9%, accoding the to time of payment:

a) $1.75 dividend in one year

b) $2.35 dividendand $41 stock value in two years

c) Total present value

Thus, the maximum price that a prudent investor would be willing to pay for a share of Valorous  Corporation stock today is $3.41

e would be the answer

an online clothing brand

explanation: