A The expected return for a stock is 10% with a forecast growth rate of 2.5%....
A The expected return for a stock is 10% with a forecast growth rate of 2.5%. The company recently paid a dividend of $3.50. What is the highest price an investor should pay for the stock?
Homework Answers
Price of stock = D0(1 + g) / (r - g)
Price of stock = $3.50(1.025) / (0.10 - 0.025)
Price of stock = $3.5875 / 0.075
Price of stock = $47.83
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