Question

A&J Corporation pays a dividend today of $2.50 per stock. The company is expected to grow at a constant rate of 5.5 percent per year forever.

a. If the required rate of return for this stock is 11.5 percent, how much would an investor pay for this stock today?

b. What is the relationship between stock price today and the required rate of return? You can use the calculations in part a to justify your answer.

PLEASE show how you would get answer using Excel!!

Answer 1