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sergeinik [125]
3 years ago
10

You are considering purchasing stock in Canyon Echo. You feel the company will increase its dividend at 3.6 percent indefinitely

. The company just paid a dividend of $3.71 and you feel that the required return on the stock is 12 percent. What is the price per share of the company's stock?
Business
1 answer:
VMariaS [17]3 years ago
3 0

Answer:

$45.76

Explanation:

Next dividend = Dividend just paid * (1 + Dividend growth rate) = $3.71 * (1 + 0.036) = $3.84356

Using the formula for the dividend discount model, we can calculate he price per share of the company's stock as follows:

Stock price = Next dividend / (Required return - Dividend growth rate) = $3.84356 / (0.12 - 0.036) = $45.76

Therefore, the price per share of the company's stock is $45.76.

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