American Express Co. (AXP) pays a dividend of $1.16 a share each quarter. If you choose...
Homework Answers
Given Quarterly Dividend= $1.16/share
All other information is provided in an annual basis.
So, Annual Dividend= 4*1.16= $ 4.64 (Since, there exists 4 quarters in a year)
As per the Dividend Discount Model of stock pricing, the price of a stock is given by,
P= D/(r-g), where r= rate of interest, g= growth rate of dividend, r= rate of interest, D= Dividend paid
So, P= 4.64/(.04-.02)= $ 232
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