Bernie's Suntan Lotions has been selling herbal, sustainable UV protection for years. The company has been expanding, and that expansion has made cash flow available for dividends spotty. That situation is expected to continue for the next five years. The dividends paid by the company (per share) are expected to be as follows: Year Dividend per Year 1 $0.95 2 $0.97 3 $0.73 4 $1.55 5 $1.81 If we assume that after these five years, the dividends begin to grow at a constant rate of 2.61% per year (based on the $1.81 expected in year 5), and if the market is requiring an annual return of 9.90% per year, what is the most you should be willing to pay for a share of Bernie's Suntan Lotion stock? Please enter your answer to the nearest penny. 13

Bernie's Suntan Lotions has been selling herbal, sustainable UV protection for years. The company has been expanding, and that expansion has made cash flow available for dividends spotty. That situation is expected to continue for the next five years. The dividends paid by the company (per share) are expected to be as follows: Year Dividend per Year 1 $0.95 2 $0.97 3 $0.73 4 $1.55 5 $1.81 If we assume that after these five years, the dividends begin to grow at a constant rate of 2.61% per year (based on the $1.81 expected in year 5), and if the market is requiring an annual return of 9.90% per year, what is the most you should be willing to pay for a share of Bernie's Suntan Lotion stock? Please enter your answer to the nearest penny. 13

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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