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OlgaM077 [116]
4 years ago
12

Richardson Brothers is expected to pay a $0.75 per share dividend at the end of the year (that is, D 1 = $0.75). The dividend is

expected to grow at a constant rate of 5 percent a year. The required rate of return on the stock, r s, is 10 percent. What is the stock’s value per share?
Business
1 answer:
CaHeK987 [17]4 years ago
5 0

Answer:

$15

Explanation:

Dividend growth rate (g) = 5% per year

Expected Dividend   (D1) = $0.75

Required return rate   (R) = 10%

Now, we have calculate the stock’s value per share by the following formula:

Current Stock Value (P0) = D1 ÷ (R-g)

P0 = $0.75 ÷ (0.10 – 0.05)

= $0.75 ÷ 0.05

= $15

Current Stock Value per Share (P0) = $15

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