You own 2,400 shares of Stephen Inc. The company plans on issuing a dividend of $.75 a share at the end of this year and then issuing a final liquidating dividend of $8.20 a share at the end of next year. Your required rate of return on this security is 17 percent. Ignoring taxes, what is the value of one share of this stock to you today?

the one share value at today is $6.63

Explanation:

The computation of the one share value at today is shown below:

Price is

= (Dividend at the year 1) ÷ (1 + required rate of return)^1  +  (Dividend at the year 2) ÷ (1 + required rate of return)^2

= ($0.75) ÷ (1 + 0.17)^1 + ($8.20)  ÷ (1 + 0.17)^2

= 0.641025641  + 5.990211118

= $6.631236759

hence, the one share value at today is $6.63

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.