PT Boats plans to pay a $2.40 a share dividend at the end of each of the next 2 years

PT Boats plans to pay a $2.40 a share dividend at the end of each of the next 2 years. At the end of year 3, it will pay a final liquidating dividend of $10 a share. After that, the company plans to close its doors permanently. What is the current value of this stock at a discount rate of 16 percent?

Answer:

P0=[2.4/(1+0.16)^1]+[2.4/(1+0.16)^2]+[10/(1+0.16)^3]

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