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Iota incorporated is in a declining industry. it just paid a dividend of $7.50, and dividends...

Iota incorporated is in a declining industry. it just paid a dividend of $7.50, and dividends are expected to decrease by 8% per year, indefinitely. If you require a return of 10% on this stock, what will you pay for a share today?
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Answer #1

Share Value today = [D0 * (1 + g)] / [r - g]

= [$7.50 * (1 - 0.08)] / [0.10 - (-0.08)]

= $6.90 / 0.18 = $38.33

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