Suppose that stock of ACME Incorporated has a required return of 10% an initial dividend of...

Question

Question

Suppose that stock of ACME Incorporated has a required return of 10% an initial dividend of $1 and 3% expected growth of its dividend. Find its price using the Gordon Growth Model.

Answer 1

Answer #1

ANSWER:

Price = dividend / (return - growth) = 1 / (10% - 3%) = 1 / 7% = 14.28

so the price is $14.28

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Answer 2

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