General importers announced today that its next annual dividend will be $2.60 per share. after that dividend is paid, the company expects to encounter some financial difficulties and is going to suspend dividends for 5 years. following the suspension period, the company expects to pay a constant annual dividend of $1.30 per share. what is the current value of this stock if the required return is 18 percent?

Price = $4.88

Explanation:

First, find the dividend per year;

D1 = 2.60

D2= 0

D3= 0

D4= 0

D5= 0

D6= 0

D7 (Onwards) = 1.30

Next, find the PV of each dividend given a rate of 18%

PV (D1) =2.60/(1.18) = 2.2034

PV (D1 to D6) = 0

PV (D7 onwards ) = = 2.6753

Price = 2.2034 + 2.6753

Price = $4.88

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.