Which of the following is an example of a strength?
2 answers:
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price per share of the company's stock is $53.28
Explanation:
Under dividend growth model a stock is overvalued or undervalued assuming that the firm’s expected dividends grow at a value g forever, which is subtracted from the required rate of return or k.
Therefore, the stable dividend growth model formula calculates the fair value of the stock as P =D1 / ( k – g ).
P= price per share
D1 = current dividend
k = required return
g = growth rate
P= $3.41 ÷ (11 % - 4.6% ) =( 3.41 ÷ 0.064 )= $53.28