Hudson Corporation will pay a dividend of $2.30 per share next year. The company pledges to...

Question

Question

business finance

Answer 1

Answer #1

Calculation of market price of share today:

Formula:(As per constant discount model)

MPS = DPS1/Ke-g

Where,

DPS1 = Dividend expected to be paid

Ke = Required return

g = growth rate

Given,

DPS1 = 2.3$

Ke = 5.9%

g = 3.8% indefinitely

Therefore,

MPS = 2.3/0.059-0.038

= 2.3/0.021

= 109.52$

Value of company's stock today = 109.52$

So,option (3) is correct

Answer 2

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