You expect a share of stock to pay dividends of $1.00, $1.25, and $1.50 in each of the next 3 years. You believe the stock will sell for $20 at the end of the third year.
a. What is the stock price if the discount rate for the stock is 10%?
b. What is the dividend yield?
Dividends:
Year 1..........$1.00
Year 2..........$1.25
Year 3..........$1.50
Discount rate........10.00%
Stock price after 3 years..$20.00