You are considering acquiring a common stock that you would like to hold for one year. You expect to receive both $1.25 in dividends and $32 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is _____ if you wanted to earn a 10% return.
A. $30.23
B. $24.11
C. $26.52
D. $27.50
E. None of the options are correct.
A. $30.23
.10 = (32 P + 1.25)/P; .10P = 32 - P + 1.25; 1.10P = 33.25; P = 30.23.
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