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VikaD [51]
3 years ago
8

Hudson Corporation will pay a dividend of $2.82 per share next year. The company pledges to increase its dividend by 3 percent p

er year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Business
1 answer:
Brilliant_brown [7]3 years ago
5 0

Answer:

An investor will be willing to pay $40.29 for this stock.

Explanation:

A constant growth dividend discount model will be used in this case because Hudson Corporation is expected to grow at a constant rate. The formula to be used is:

Price = Expected Dividend (Dividend of Year 1) / Required Return - Growth Rate

                                                          OR

Price = 2.82 / (.1 - .03) = 2.82 / .07 = $40.29.

Thanks!

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The term "Marginal propensity" to consume is term used in economics. It measures monetary value which consumer is willing to spend to buy goods and services instead of saving it.

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Therefore , we can conclude that the correct option is C.

Learn more about Marginal propensity on:

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