Synovec Corporation is expected to pay the following dividends over the next four years: $5.20, $16.20, $21.20, and $3.00. Afterward, the company pledges to maintain a constant 5.5 percent growth rate in dividends forever. If the required return on the stock is 9 percent, what is the current share price?

Present value = $92.6899 rounded off to $92.69

Explanation:

Using the dividend discount model, we calculate the price of the stock today. It values the stock based on the present value of the expected future dividends from the stock. To calculate the present value of the next four dividends, we will use the following formula,

Present value = D1 / (1+r)  +  D2 / (1+r)^2  +  D3 / (1+r)^3  +  D4 / (1+r)^4  +

[(D4 * (1+g)  /  (r - g))  /  (1+r)^4]

Where,

Present value = 5.2 / (1+0.09)  +  16.2 / (1+0.09)^2  + 21.2 / (1+0.09)^3  +  

3 / (1+0.09)^4  +  [(3 * (1+0.055)  /  (0.09 - 0.055))  /   (1+0.09)^4]

Present value = $92.6899 rounded off to $92.69

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the answer would be voluntary exchange -

"the act of buyers and sellers freely and willingly engaging in market transactions. moreover, transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred."

hope this : )

-shy