QUESTION 23
A share of common stock just paid a dividend (D0) of $1.50. If the expected long-run growth rate for this stock is 5%, and if investors' required rate of return is 11.5%, what is the current stock price?
1. |
$17.57 |
|
2. |
$24.23 |
|
3. |
$17.13 |
|
4. |
$18.01 |
|
5. |
$16.28 |
2. |
$24.23 |
As per dividend discount model, | ||||||
Current share price | = | D0*(1+g)/(Ke-g) | Where, | |||
= | 1.50*(1+0.05)/(0.1150-0.05) | D0 | = | $ 1.50 | ||
= | $ 24.23 | g | = | 5% | ||
Ke | = | 11.5% |
QUESTION 23 A share of common stock just paid a dividend (D0) of $1.50. If the...
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