1. A stock recently paid a dividend of $2.35. Dividends are expected to grow at a...

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Question

1. A stock recently paid a dividend of $2.35. Dividends are expected to grow at a...

1. A stock recently paid a dividend of $2.35. Dividends are expected to grow at a constant rate of 6%. If the stock as a required rate of return of 10%, what is the price of the stock?

a. $58.75

b. $62.28

c. $74.32

d. $81.93

business finance

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Answer 1

Answer #1

Option b

Stock price = Expected dividend/ (required return-growth rate)

= 2.35*106%/(10%-6%)

= 2.491/4%

= 62.28

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Answer 2

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