Answer-first summary for fast verification
Answer: $68.98
## Explanation This is a one-period dividend discount model calculation: \[ P_0 = \frac{D_1 + P_1}{(1 + r)} \] Where: - \( D_1 = \$1.50 \) (dividend next year) - \( P_1 = \$73.00 \) (expected stock price at end of next year) - \( r = 8\% = 0.08 \) (required rate of return) \[ P_0 = \frac{1.50 + 73.00}{(1 + 0.08)} = \frac{74.50}{1.08} = \$68.98 \] Therefore, the estimated value of the stock today is **$68.98**.
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An analyst forecasts that a company will pay a dividend of $1.50 next year and have a stock price of $73 at the end of the next year. If the required rate of return is 8%, the estimated value of the stock today is closest to:
A
$67.59
B
$68.98
C
$74.50
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