Question

Hi-Tek plans to pay a $6 per share dividend one year from today, and will increase the dividend by 4 percent per year forever. What is the current share price if the required return on this stock is 16 percent

Answer 1

Answer:

The current share price if the required return on this stock is 16 percent is $50.

Explanation:

price = dividend next year /(required rate of return - growth rate)

         = 6/(16% - 4%)

         = 50

Therefore, The current share price if the required return on this stock is 16 percent is $50.