You are considering the purchase of Zee Company stock. You ...

[P68T]

You are considering the purchase of Zee Company stock.
 
  You anticipate that the company will pay dividends of
  3.50 per share next year and 4.00 per share the following year. You believe that you can sell the stock for
  20.00 per share two years from now. If your required rate of return is 10 percent, what is the maximum price
  that you would pay for a share of Zee Company stock?

Question 2

If a company in a perfect capital market decreased its dividend per share, an investor would be
  forced to sell his common stock at a depressed price.
 
  Indicate whether the statement is true or false

[anoriega3]

Answer to Question 1

VC = 3.50 (PVIF10,1 ) + 24.00 (PVIF10,2 ) = 23.02

Answer to Question 2

FALSE

[P68T]

TY

[anoriega3]

Happy to Help