39 You are considering buying common stock in Grow On, Inc. The firm yesterday paid a...
39
You are considering buying common stock in Grow On, Inc. The firm yesterday paid a dividend of $8.20. You have projected that dividends will grow at a rate of 7.0% per year indefinitely. If you want an annual return of 13.0%, what is the most you should pay for the stock now?
| $63.08 |
| $136.67 |
| $146.23 |
| $67.49 |
| $159.77 |
Homework Answers
Value of Stock is equal t present value of all future dividends
Value of Stock = Dividend yesterday (1+growth rate)/(Required Return - GrowthRate)
= 8.20(1+0.07)/(0.13-0.07)
= $146.23
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39
You are considering buying common stock in Grow On, Inc. The
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