(SOLVED) Camila is considering to purchase Infinity Corporation stock.

Question

Camila is considering to purchase Infinity Corporation stock. She predict that the company will pay dividends of $3.50 per share next year and $4.00 per share the following year. She also believe that you can sell the stock for $20.00 per share two years from now.

Question:

If your required rate of return is 10%, what is the maximum price that you would pay for a share of Infinity Corporation stock?

Expert Solution Preview

Stock Price=(D1/(1+required rate))+((D2+P2)/(1+required rate)^2)=