Given :
Apocalyptica Corp. pays a constant $18 dividend on its stock.
The company will maintain this dividend for the next 4 years and will then cease paying dividends forever.
To Find :
If the required return on this stock is 7.78 percent, what is the current share
price.
Solution :
Current price ( After 4 hours ) :
[tex]C.P = 18[\dfrac{1}{(1+0.10)^1}+\dfrac{1}{(1+0.10)^2}+\dfrac{1}{(1+0.10)^3}+\dfrac{1}{(1+0.10)^4}]\\\\C.P=\$57.058[/tex]
Therefore, current share price is $57.058 .
Hence, this is the required solution.
