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28 August, 15:28

After careful analyzing AutoZone stock, you think that it will trade for $100.00 in one year. AutoZone has announced a dividend for next year of $1.00 per share. If you want a 15.00% return on your investment this year, how much is the stock worth to you today?

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  1. 28 August, 19:01
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    You think stock will trade for $100

    Next year dividend = $1

    Stock today = (Future Stock price + Dividend) / (1+rate of return)

    Stock today = (100 + 1) / (1+0.15)

    Stock today = 101 / 1.15 = $87.83

    The stock is worth $87.83 today
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