The current dividend on a preferred share of Generic Corp. stock is $1. The discount rate...

Question

Question

The current dividend on a preferred share of Generic Corp. stock is $1. The discount rate is 12%.

If the growth rate of the company is 10%, what would be the price of the stock next year?

Answer 1

Answer #1

Price of the stock is calculated as follows:

Do X (1+9) Price = T-9 Do = current dividend, g = growth rate, r = required rate 1x (1.10) Price = 0.12 - 0.10 Price = 55

So the price is $55

Answer 2

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