Islander Corporation's common stock will pay a dividend of $3.50 one year from now. The annual dividend growth rate is 6% over two years after that. You plan to buy the stock now and sell at the end of third year for $80. At what price must you buy in order to receive your required return of 18%?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Islander Corporation's common stock will pay a dividend
of $3.50 one year from now. The annual dividend growth
rate is 6% over two years after that. You plan to buy the
stock now and sell at the end of third year for $80. At
what price must you buy in order to receive your required
return of 18%?
O $29.17
$62.29
$74.86
O $72.36
$56.71
Transcribed Image Text:Islander Corporation's common stock will pay a dividend of $3.50 one year from now. The annual dividend growth rate is 6% over two years after that. You plan to buy the stock now and sell at the end of third year for $80. At what price must you buy in order to receive your required return of 18%? O $29.17 $62.29 $74.86 O $72.36 $56.71
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