Greshak Corp.'s common stock recently paid a dividend of $3.00. If the expected long-run growth rate...

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Greshak Corp.'s common stock recently paid a dividend of $3.00. If the expected long-run growth rate...

Greshak Corp.'s common stock recently paid a dividend of $3.00. If the expected long-run growth rate for this stock is 5%, and if investors require an 11% rate of return, what is the price of the stock? TO RECEIVE CREDIT, YOU MUST SHOW ALL WORK NECESSARY TO SUPPORT YOUR ANSWER.

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Answer 1

Answer #1

Price of the stock = D₀(1 + g) / (rs - g)

Price of the stock = $3.00(1 + 0.05) / (0.11 - 0.05)

Price of the stock = $52.50

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Answer 2

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