ABC Corp. pays a constant $8 dividend per year on its stock. The company will maintain this dividend for the next 10 years and will then stop paying dividends forever. If the required return on this stock is 10% per year, what is the current stock price?
Current price=Annual dividend*Present value of annuity factor(10%,10 years)
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=8[1-(1.1)^-10]/0.1
=8*6.14456711
=$49.16(Approx)
ABC Corp. pays a constant $8 dividend per year on its stock. The company will maintain...
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