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Compute the price of share of stock that pays a $1 per year dividend and that you expect to be able to sell in?

Compute the price of share of stock that pays a $1 per year dividend and that you expect to be able to sell in one year for $20, assuming you require a 15% return.

Public Comments

1. You need to buy this particular stock around $17.75
2. Let x = cost of stock. profit + dividend = 15% of cost (Sale - Cost) + $1 = .15 of cost ($20 - x) + 1 = .15x 20 + 1 - x = .15x 21 - x = .15x 21 = 1.15x 18.26 = x If you bougtht at $18.26 and sold for $20 and also collected $1 dividend, then your return would be $2.74 or 15%