Question

$35.00 per share is the current price for Foster Farms' stock. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, rs, is 9.00%. What is the stock's expected price 3 years from today? Select the correct answer.

Answer 1

Answer:

$44.45

Explanation:

The return on the stock is 9.00% of $35.00, which gives $35.00 +3.15.

Therefore, return on the stock will be $38.15. Since the stock is projected to increase at constant rate of $5.5 over 3 years. The stocks expected price 3 years from today is $44.45