Question

CSU Co. just paid a dividend of $1.4 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors require an 12.6 percent return on Sky High Co. stock, the current price is $ _________ . Round it to two decimal places, and do not include the $ sign, e.g., 23.56.

Answer 1

Answer:

$16.93

Explanation:

Current stock price = dividend ( 1 + growth rate) / required return - growth rate

$1.4(1.04) / 0.126 - 0.04 = $16.93