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Anettt [7]
3 years ago
8

TMS just paid an annual dividend of $2.84 per share on its stock. The dividends are expected to grow at a constant rate of 1.85

percent per year. If investors require a rate of return of 10.4 percent, what will be the stock price be in Year 11
Business
1 answer:
bija089 [108]3 years ago
5 0

Answer:

$41.39

Explanation:

Data provided in the question:

Annul Dividend paid, D0 = $2.84 per share

Growth rate, g = 1.85% = 0.0185

Rate of return required, r = 10.4% = 0.104

Now,

Current price of the stock at year 11 = D12 ÷ [ r - g]

= [ $2.84 × (1 + g)¹²] ÷ [ r - g]

=  [ $2.84 × (1 + 0.0185)¹²] ÷ [ 0.104 - 0.0185]

= 3.539 ÷ 0.0855

= $41.39

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Apart from the fact that tariff is a way of generating revenue by the government, tariffs help protect the domestic industry. This is because tariffs increases the price of imported goods.

Since there is an increase in the price of the imports, consumers tend to buy from the local manufacturer since their products tend to be cheaper when compared to the imports. This gives an edge to the domestic companies.

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<u>Explanation:</u>

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