Question

How much is a share of Bama Corporation stock expected to be worth one year from now, if you pay $80 per share today for this stock, the next dividend will be $4 per share, and your required rate of return on equity investment is 10%?

*Topic: One-period model for stock valuation; Equity Markets and Stock Valuation*

*Question: How much is a share of Bama Corporation stock expected to be worth one year from now, if you pay $80 per share today for this stock, the next dividend will be $4 per share, and your required rate of return on equity investment is 10%? (show and label all calculations)*

Step 1

According to the information provided, the stock has a current market price of $80, with a dividend of $4 next year and required rate of return of 10%.

Using single period Dividend Discount model

Step 2

Putting the value in the above equatio...

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