Henry Co. is expected to pay a dividend of 13.50 one year from now, and investors expect that dividend to remain stable for the foreseeable future. At a discount rate of 12%, how should Henry Co.'s stock be valued? Please round your answer to the nearest penny.
The price of a stock that has a constant dividend with zero growth is | ||||||
P0 = DIv1/R | ||||||
where P0 is the price of the stock | ||||||
Div1 is the dividend a year from now that is 13.50. | ||||||
R is the discount rate that is 12%. | ||||||
The stock should be priced at | ||||||
P0 = 13.50/.12 | ||||||
P0 = $112.5 | ||||||
Henry Co's stock should be valued at $112.5. |
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