You want to purchase some shares of JJ Farms stock but need a 14.5 percent rate...
You want to purchase some shares of JJ Farms stock but need a 14.5 percent rate of return to compensate for the perceived risk. What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $1.25 annual dividend per share?
Homework Answers
value of perpetuity = annual dividend/rate of return
= 1.25/14.5%
= 1.25/0.145
= 8.62
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