1) A reasonable way to put a value on a share of stock is to discount the stream of expected future dividends (annual pa

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1 A Reasonable Way To Put A Value On A Share Of Stock Is To Discount The Stream Of Expected Future Dividends Annual Pa 1 (24.87 KiB) Viewed 38 times

1) A reasonable way to put a value on a share of stock is to discount the stream of expected future dividends (annual payments to the shareholder) by the so-called opportunity cost of money (the interest rate you could get from the bank if you didn't hold on to the stock). If a share of stock is anticipated to pay a $5 dividend annually for the next five years and then $8 every year after that in perpetuity, what would the share be worth according to this model if the cost of money is 4%? Dividends are paid at the end of a year.