Answer :
The value of BPC stock is closest to $48.50.
Using the provided information, we can use the dividend discount model to calculate the value of BPC stock. The formula for this is
P₀ = D₁ / (r - g),
where:
P₀ = current stock price
D₁ = expected dividend in one year
r = required rate of return
g = expected dividend growth rate
We know that BPC expects to pay a dividend of $1.28 in exactly one year. We also know that BPC expects a dividend growth rate of 50% during years 2, 3, and 4, and then a normal growth rate of 3.1% will occur. BPC shareholders require a 14.7% return. Using these values, we can calculate the stock price:
P₀ = [$1.28(1 + 0.50)/(0.147 - 0.50)]+ [$1.28(1 + 0.50)2/(0.147 - 0.50)2] + [$1.28(1 + 0.50)3/(0.147 - 0.50)3] + [$1.28(1 + 0.031)3/ (0.147 - 0.031)]
P0 = [$1.9 /-0.3535] + [$2.88/0.216] + [$4.32/ 1.0824] + [$4.13/0.116]
P0 = -$5.42 + $13.33 + $3.99 + $35.60
P0 = $48.50
Therefore, the value of BPC stock is $48.50.
Learn more about the dividend discount model at https://brainly.com/question/28474041
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