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Sergeu [11.5K]
3 years ago
8

BlackHawk anticipates paying a dividend of $4.25 next year and is expected to grow the dividend at a constant rate of 7% per yea

r, indefinitely. If the required rate of return by shares holders is 13%, then, according to the Gordon Model, what should the price of the stock be today
Business
1 answer:
siniylev [52]3 years ago
4 0

Answer:

$70.83

Explanation:

The Gordon Growth model (or the dividend discount model) provides a simple formula for calculating the intrinsic price of stocks:

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

price of stocks = $4.25 / (13% - 7%) = $4.25 / 6% = $70.83

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