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Whited Inc.'s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.50% per year. The required rate of return on the stock, r , is 11.50%. What is the stock's expected price 5 years from now?a. $43.93b. $51.40c. $52.27d. $35.58e. $53.59

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ahmedgodtrust

Answer:

Current market price (Po) = $35.25

Growth rate (g) = 4.5% 0.045

Market price 5 years from now

P5 = Po(1 +g )n

P5 = $35.25(1 + 0.045)5

P5 = $43.93

The correct answer is A

Explanation:

Market price 5 years from now is equal to current market price multiplied by 1 + growth rate raised to power 5.

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