A wealth manager considers investment in a company that is expected to pay a $6 cash...
A wealth manager considers investment in a company that is expected to pay a $6 cash dividend next year and grow by 5% every year. Given the required rate of return is 10%, what is the maximum value of the stock?
A. 200
B. 100
C. 120
D. infinite
Homework Answers
Current price=D1/(Required return-Growth rate)
=6/(0.1-0.05)
which is equal to
=$120
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