8. How much are you willing to pay for one share of Jumbo Trout stock if the company is expected to pay an annual dividend of $0.45 at the end of next year, the dividends increase by 3.5 percent annually indefinitely and you require a 10 percent rate of return?
$6.92 Please Show All Work
Annual Dividend Next year, D1 = $0.45
Growth rate, g = 3.5%
Required rate of return, ke = 10%
Fair value of stock = D1/(Ke-g)
Hence, fair value = 0.45/(0.1-0.035)
= $6.923 (approx.)
Hence, The price I would be willing to pay per share = $6.923
8. How much are you willing to pay for one share of Jumbo Trout stock if...
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