Question

NBC company is expected to pay a $1.60 per share dividend at the end of this...

NBC company is expected to pay a $1.60 per share dividend at the end of this year (i.e., D1=$1.60). The dividend is expected to grow at a constant rate of 10% a year from the current period to the foreseable future. The required rate of return on the stock, rs , is 15%. What is the price per share of NBC's stock today?

1.

$25.00

2.

$32

3.

$20.00

4.

$16.75

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Answer #1

Calculate the price per share as follows:

Price = Dividend / (Required rate - growth rate)

Price = $1.60 / (15% -10%)

Price = $32.

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