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share valuation

Maneesh 03 May 2020 at 12:50 PM

The CFO of Bislin , a publicly-traded company, is expecting to pay a dividend next year of $1.25 and projecting that the price of the company’s stock will be $45 in one year. The CFO has determined that the required rate of return for Bislin is 10%. Based on the data available, what is the value of one share of Bislin's stock today?
A) $51.39
B)  $46.25
C)  $45.00
D) $42.05

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FACULTY 14 May 2020 at 12:27 PM

Dividend for next year (D1) = $1.25

stock value 1st year(p1) = 45

stock value = D1+P1/1+required rate of return

                     = 45+1.25/1+.10

                     =46.25/1.10

                     =42.05  (option D)

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