Herrera Motor Inc. paid a 3.25 dividend last year. At a constant growth rate of 6%,...

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Herrera Motor Inc. paid a 3.25 dividend last year. At a constant growth rate of 6%,...

Herrera Motor Inc. paid a 3.25 dividend last year. At a constant growth rate of 6%, what is the value of the common stock if the investors require a rate of return of 18%?

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Answer 1

Answer #1

Value of stock = Expected Dividend/(Required rate of return - growth rate)

= 3.25(1+6%)/(18%-6%)

= $28.70833

i.e. $28.71

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Answer 2

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Herrera Motor Inc. paid a 3.25 dividend last year. At a constant growth rate of 6%,...