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Sullivan Brothers is expected to pay a $1.75 per share dividend at the end of the...

Sullivan Brothers is expected to pay a $1.75 per share dividend at the end of the year (that is, D 1 = $1.75). The dividend is expected to grow at a constant rate of 3 percent a year. The required rate of return on the stock, r s, is 9 percent. What is the stock’s value per share?

a.

$29.17
b.

$19.44
c.

$20.03
d.

$28.32
e.

$30.04
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Answer #1

Market capitalisation rate ke= 9.00% 3.00% g = $1.750 D1 = $29.17 Price - D1/(ke-g) 1.75/(9.00%-3.00%)

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