You are considering an investment in the common stock of Milton Stapler Corp (MSC). The stock is expected to pay a dividend of $4.25 per share at the end of the year, but the dividend is expected to remain constant forever, with no growth. Your required return on MSC is 11%. The risk-free rate is 6%, and inflation is 4%. What price should you be willing to pay for MSC?
Stock has perpetual dividend with no growth in dividend
Stock Price = Annual Dividend/Required Return
Stock Price = 4.25/0.11
Stock Price = $38.64
You are considering an investment in the common stock of Milton Stapler Corp (MSC). The stock...