If a stock that you are holding for one year has an estimated dividend payout of $1.10 and an expected sale price of $22, what is the value of the stock?
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A. B. C. D.A
In order to value the stock, a discount rate must be provided.
To calculate the value of the stock, we need to consider the future cash flows from the dividend payout and the expected sale price.
The value of a stock can be determined using the dividend discount model (DDM) approach, which values the stock based on the present value of its expected future dividends. The formula for the DDM is as follows:
Value of Stock = (Dividend / (1 + Required Rate of Return)) + (Sale Price / (1 + Required Rate of Return))^(n)
In this case, the dividend payout is estimated to be $1.10, and the expected sale price is $22. However, we don't have information about the required rate of return or the holding period (n). Without these details, we cannot calculate the value of the stock accurately.
Therefore, the correct answer is A. "not enough information to calculate it."