The James River Co. pays an annual dividend of $1.50 per share on its common stock....
The James River Co. pays an annual dividend of $1.50 per share on its common stock. This dividend amount has been constant for the past 15 years and is expected to remain constant in the future. Given this, one share of James River Co. stock today:
A. is basically worthless as it offers no growth potential.
B. has a market value equal to the present value of $1.50 paid one year from today.
C. is valued as if the dividend paid is a perpetuity.
D. is valued with an assumed growth rate of 3%.
E. has a market value of $15.00.
Homework Answers
The company is assumed to be going concern if it is viable and is distributing dividends regularly thus it is valued at perpeutiy,
the answer is :-
C. is valued as if the dividend paid is a perpetuity.
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