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Stock X will pay a dividend of $2.50 next period. If the expected return for the...

Stock X will pay a dividend of $2.50 next period. If the expected return for the stock is 22%, with an expected constant growth rate in its dividend of 18%, the value of the stock should be:

$63.75

$68.75

$66.25

$62.50

$65.32

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Answer #1

D) $62.5

explanation:

Price = dividend to be paid / expected return - growth rate

= 2.50 / 0.22 - 0.18

= 2.50 / 0.04

= $62.5

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