Kinard's Kennels Inc. ROE is 20%. Their dividend payout ratio is 70%. The last dividend, just paid, was $2.00. If dividends are
1 answer:
Answer:
option C
Step-by-step explanation:
given,
ROE = 20 %
dividend payout ratio = 70%
paid = $ 2.00
value of current stock if required return is 18% = ?
g = (1 - payout ) x ROE
= (1 - 0.7 ) x 20%
= 6 %
dividend = 2 (1 + growth rate)
= 2 x (1 + 0.06) =$ 2.12
as current value of stock
=
=
= $17.67
hence, the correct answer is option C
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