A company's stock recently paid a dividend of $4.02 and expects dividends to grow annually at...
A company's stock recently paid a dividend of $4.02 and expects dividends to grow annually at a rate of 6.2%. Based on the CAPM, the required return for this stock is estimated to be 13.0%. Based on this, the maximum that you would be willing to pay for the stock is $__.__. Round your answer to 2 decimal places.
Homework Answers
Ans $ 62.78
| P0 = | Price of Share |
| D1 = | Current Dividend |
| Ke = | Cost of Equity |
| g = | growth rate |
| P0 = | D1 / (Ke - g) |
| P0 = | 4.26924 / (13%- 6.2%) |
| P0 = | 62.78 |
| D1 = | D0* (1 + g) |
| D1 = | 4.02* (1 + 6.2%) |
| D1 = | 4.26924 |
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