TLC Corp. will pay an annual dividend tomorrow of $2.23. The market expects a return of...
TLC Corp. will pay an annual dividend tomorrow of $2.23. The market expects a return of 9%, and you expect TLC will grow at 4.8%. With these assumptions, what is the price you are willing to pay for the stock?
Homework Answers
| Price = recent dividend* (1 + growth rate )/(cost of equity - growth rate) |
| Price = 2.23 * (1+0.048) / (0.09 - 0.048) |
| Price = 55.64 |
Price today = price tomorrow+dividend = 55.64+2.23
=
| 57.87 |
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