Question

Antiques ‘R’ Us is a mature manufacturing firm. The company just paid a dividend of $11.45, but management expects to reduce the payout by 5.4 percent per year, indefinitely.
 Required:
If you require a return of 11 percent return on this stock, what will you pay for a share today? 

Answer 1

Stock price 01:(r-8) Here, $ =11.45*(1-5.4%) Expected dividend (D1) Required return (r) Growth rate (g) 10.83 11% -5.4% Stock price $ 66.05

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