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Natali5045456 [20]
3 years ago
11

You have decided that you would like to own some shares of GH Corp. but need an expected 12% rate of return to compensate for th

e perceived risk of such ownership. What is the maximum you are willing to spend per share to buy GH stock if the company pays a constant $3.50 annual dividend per share?
Business
1 answer:
oee [108]3 years ago
3 0

Answer:

Share price = 29.16

Explanation:

Given:

Dividend paid = $3.50

Required rate  of return = 12% = 12/100 = 0.12

Growth rate  = 0%

Find:

Share price  = ?

Computation:

⇒ Share price  = Dividend paid / [Required rate  of return - Growth rate ]

⇒ Share price = $3.5/(0.12-0)

⇒ Share price = 29.16

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