Mickelson corporation will pay a dividend of $3.14 per share next
To calculate the amount you would pay for Mickelson Corporation’s stock today, we must first calculate the present value of the future dividend payments:
Present Value = Dividend / (1 + Required Rate of Return) ^ N
Where Dividend is $3.14, Required Rate of Return is 12%, and N is 1 since this is the first year.
Present Value = 3.14 / (1 + 0.12) ^ 1
= 3.14 / 1.12
= 2.82
The stock price that equates to a return of 12 percent can then be calculated using this Present Value figure.