Suppose today is Dec 31st 2015, and you are considering purchasing IBM stock.IBM will pay a dividend of 50 cents per sha...
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Suppose today is Dec 31st 2015, and you are considering purchasing IBM stock.
IBM will pay a dividend of 50 cents per share every quarter in 2016. You expect to sell IBM after you collect the fourth quarterly dividend in December 2016. The selling price will be $45.
Suppose the equity cost of capital on IBM is 14%, compounded quarterly. How much will you pay for IBMâs stock today?