Question

Hudson Corporation will pay a dividend of $5.30 per share next year. The company pledges to...

Hudson Corporation will pay a dividend of $5.30 per share next year. The company pledges to increase its dividend by 2.70 percent per year indefinitely.

  

If you require a return of 12.40 percent on your investment, how much will you pay for the company's stock today?

Multiple Choice

  • $53.20

  • $56.82

  • $54.64

  • $52.45

  • $34.18

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Answer #1

Current price=D1/(Required return-Growth rate)

=5.30/(0.124-0.027)

which is equal to

=$54.64(Approx).

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