Question

Metroplex Corporation will pay a $2.30 per share dividend next year. The company pledges to increase its dividend by 3.80 percent per year indefinitely. Required: If you require an 6.80 percent return on your investment, how much will you pay for the company's stock today? O $73.60 $73.86 $20.90 O $79.73 $76.67

Answer 1

Po - Divi -9 Po = Price of Stock Divi = Estimated Dividends for Next Period r = Required Rate of Return 9 = Growth Rate

$P_0 = \frac{2.30}{0.068 - 0.038}$

$P_0 = \frac{2.30}{0.03}$

$P_0 = 76.67 ---> Answer$