45) Using the Constant Growth (Gordon) Model, what should be the current price of a stock...

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45) Using the Constant Growth (Gordon) Model, what should be the current price of a stock...

45) Using the Constant Growth (Gordon) Model, what should be the current price of a stock if the next expected dividend is $5, the stock has a required rate of return of 20%, and a constant dividend growth rate of 6%?

		A) $19.23
		B) $25.00
		C) $35.71
		D) $37.86

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Answer 1

Answer #1

C) $35.71

Current price = D₁ / (rs - g)

Current price = $5 / (0.20 - 0.06)

Current price = $35.71

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Answer 2

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