ABC Online Merchant has a current stock price of $42.50. The company paid $1.34 in dividends...
ABC Online Merchant has a current stock price of $42.50. The company paid $1.34 in dividends this year, and the dividends are expected to grow at 3% per year. If an investor has a required rate of return of 5%, what is ABC worth to that investor?
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A : $69.01.
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B : $34.33.
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C :$70.35.
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D : $46.01.
Homework Answers
Current price=D1/(Required return-Growth rate)
= (1.34*1.03)/(0.05-0.03)
which is equal to
=$69.01
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