A share of common stock just paid a dividend of $1.00 If the expected long-run growth...

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A share of common stock just paid a dividend of $1.00 If the expected long-run growth...

A share of common stock just paid a dividend of $1.00 If the expected long-run growth rate for this stock is 5.4%, and if investors' required rate of return is 14%, what is the stock price?

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Answer 1

Answer #1

Stock price = D₀(1 + g) / (r - g)

Stock price = $1.00(1.054) / (0.14 - 0.054)

Stock price = $12.26

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Answer 2

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