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Assuming a return on stocks of 14%, what is the value of a              company that...

Assuming a return on stocks of 14%, what is the value of a             

company that pays a current dividend of $2.85 and will grow at 7% forever?

PLEASE TYPE YOUR ANSWER

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Answer #1

The value is computed as shown below:

= Current dividend (1 + growth rate) / ( return on stock - growth rate)

= $ 2.85 (1 + 0.07 ) / ( 0.14 - 0.07)

= $ 43.56 Approximately

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