Question #11
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 5
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
An investor projects the price of a stock to be $16.00 in one year and expected the stock to pay a dividend at that time of $2.00. If the required rate of return on the shares is 11%, what is the current value of the shares?
Answer Choices:
A. $15.28
B. $16.22
C. $14.11
Explanation
The value of the shares = ($16.00 + $2.00) / (1 + 0.11) = $16.22