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Question

Questions #7 and #8 use the following setup.

Intel will pay a quarterly dividend of $0.32 for each quarter

in the next year. And, you expect its stock price to be $53.86 by the end of next year. The (annual) required return is 14%, with quarterly compounding.

How much are you willing to pay for Intel's stock today?

Hint: you need to convert the annual rate into the quarterly rate by dividing it by 4.


Following Question #7, how much can you sell the stock for immediately after its 2nd dividend is paid out?

Assume the (annual) required return is 14%, with quarterly compounding.

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Willing purchase Price and Selling price of Stock.jpg

Ans 1
Details
Q1
Q2
Q3
Q4
Total
Dividend
0.32
0.32
0.32
0.32
Price at year End
53.86
Total Cashflows
0.32
0.32
0.32
54.18
Required Return Quarterly
14/4=3.5%
PVDF @ 3.5%
0.9662
0.9335
0.9019...

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