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A stock is expected to pay a dividend of $0.75 at the end of the year....

A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price?

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Answer #1

Hi,


Please find the answer as follows:


Current Price = D1/(Ke-g)

= .75/(.105 - .064) = 18.292 or 18.29


Answer is $18.29


Thanks.

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Answer #2

Using the dividend growth model:

$0.75/(10.5% - 6.4%)

= $18.29

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