NBC company is expected to pay a $2.50 per share dividend at the end of this year (i.e., D1=$2.50). The dividend is expected to grow at a constant rate of 6% a year from the current period to the foreseable future. The required rate of return on the stock, rs , is 15%. What is the price per share of NBC's stock today?
1. |
$25.00 |
|
2. |
$27.78 |
|
3. |
$25.75 |
|
4. |
$20.00 |
P0 = D1 / (k - g)
= 2.50 / (0.15 - 0.06)
= 2.50 / 0.09
P0 = $ 27.78
Option B is correct.
NBC company is expected to pay a $2.50 per share dividend at the end of this...
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