Answer:
the value of the stock is $95.53
Explanation:
The computation of the value of the stock is as follows;
Price at end of year 5 is
= [Dividend at year 6 ÷ ( Discount rate - Growth rate ) ]
= [Dividend year 0 * 1.03^6 ÷ ( Discount rate - Growth rate ) ]
= [($4 × 1.03^6 ) ÷ ( 0.08 - 0.03 ) ]
= [4 × 1.1941 ÷ 0.05 ]
= $95.53
Hence, the value of the stock is $95.53
