Using the one-period valuation model,assuming a year-end dividend of $1.00,an expected sales price of $100,and a required rate of return of 5%,the current price of the stock would be
A)$110.00.
B)$101.00.
C)$100.00.
D)$96.19.

Question

Quizplus · Accepted Answer

Using the one-period valuation model, we can calculate the current stock price as follows:

Current stock price = (Dividend + Expected sales price) / (1 + Required rate of return)
                   = ($1.00 + $100) / (1 + 0.05)
                   = $101.05
                   
Therefore, the closest option provided is Option D, with a price of $96.19 which is the next lowest price.

Using the One-Period Valuation Model,assuming a Year-End Dividend of $1