Kindzi Co. has preferred stock outstanding that is expected to pay an annual dividend of $3.34 every year in perpetuity. If the

Question

Mashutka [201]

3 years ago

14

Kindzi Co. has preferred stock outstanding that is expected to pay an annual dividend of $3.34 every year in perpetuity. If the

required return is 3.59 percent, what is the current stock price?

Business

1 answer:

zhenek [66] · Answer 1 · 2022-07-22T04:10:51+03:00

Answer:

The current price of the stock is $93.036

Explanation:

The zero growth dividend model provided by the DDM will be used here to calculate the value of stock today. The stock's dividedn are just like a perpetuity. The value or pirce of a perpetuity is,

P0 = D / r

Where,

D is the dividend

r is the required rate of return

P0 = 3.34 / 0.0359

P0 = $93.036