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My name is Ann [436]
3 years ago
8

Dragon express inc. just paid a $1.57 dividend and investors expect that dividend to grow by 5% each year forever. if the requir

ed return on the stock investment is 14%, what should be the price of the stock today.
a. $11.21
b. $17.44
c. $25.37
d. $18.32
Business
1 answer:
Elena-2011 [213]3 years ago
6 0

To solve this problem, we will use a valuation method named income valuation includes discounting of the profits the stock will carry to the stockholder in the probable future, and a final value on disposal.

Solution:

1.57 (1.05) / (.14 - .05)

= 18.32. the answer is letter d.

<span> </span>

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