Question

A stock is expected to pay $ 1.10 per share every year indefinitely and the equity cost of capital for the company is 8.4​%. What price would an investor be expected to pay per share ten years in the​ future?

Answer 1

Answer:

$13.06

Explanation:

Data provided in the question

Expected dividend pay every year  = $1.10

And the equity cost of capital is 8.4%

So, the price expected to pay per share ten years in future is

= Expected dividend pay every year ÷ the equity cost of capital

= $1.10 ÷ 8.4%

= $13.06

By dividing the expected dividend by the equity cost of capital we can get the price