A stock is expected to pay $1.10 per share every year indefinitely and the equity cost...
A stock is expected to pay $1.10 per share every year indefinitely and the equity cost of capital for the company is 7.1% . What price would an investor be expected to pay per share ten years in the future?
a. $23.24
b. $15.49
c. $30.98
d. $38.73
Homework Answers
Current value of share=Annual dividend/equity cost of capital
=1.1/0.071
=$15.49(Approx).
Hence in this case of no growth;P10 would be equal to Current price
=$15.49(Approx).
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