Sew 'N More just paid an annual dividend of $1.42 a share. The firm plans to pay annual dividends of $1.45, $1.50, and $1.53 over the next 3 years, respectively. After that time, the dividends will be held constant at $1.60 per share. What is this stock worth today at a discount rate of 9 percent

The stock is worth $17.50 per share today

Explanation:

The price per share today can be calculated using the DDM where expected dividends are discounted back to present value to calculate the share price. When the dividend growth becomes zero, we will calculate the terminal value at the end of Year 3 and discount it back too. The formula for price of the stock today is,

P0 = D1 / (1+r)  +  D2 / (1+r)^2  +  D3 / (1+r)^3  +  [ (D4 / r) / (1+r)^3]

P0 = 1.45 / (1+0.09)  +  1.5 / (1+0.09)^2  +  1.53 / (1+0.09)^3  +  

[ (1.6 / 0.09) / (1+0.09)^3]

P0 = $17.50

A decrease in price leads to a decrease in supply.

-An increase in price leads to an increase in supply.

As the price of a product fall down, the amount of profit that the sellers would get for selling the product would also fall. This would cause them to decrease the amount of supply so they can produce more profitable happen. The exact opposite happen when the price of the product rises.

Explanation:

the statements that are true according to the law of supply are: -A decrease in price leads to a decrease in supply. -An increase in price leads to an increase in supply. Increase in price encourage producer to sell more because it make them gain more profit, which lead in the increase in supply.