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andrey2020 [161]
3 years ago
9

Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $11.15, but management expects to reduce the p

ayout by 6 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a share today
Business
1 answer:
horrorfan [7]3 years ago
3 0

Answer:

the stock price is $58.23

Explanation:

The computation of the price pay per share today is shown below:

Stock price is

= Current year dividend ÷ (required rate of return - growth rate)  

= $11.15 × (1 - 0.06) ÷ (12% - (-6%)

= $10.48 ÷ 18%

= $58.23

Hence, the stock price is $58.23

We simply applied the above formula so that the correct value could come

And, the same is to be considered

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Less: long-term debt brought forward from 2017..........$1.87 million

Total (taken as net new borrowing)...................................$340,000

Cash flow to creditors = 2018 Interest expense less net new borrowing

= $255,000 - $340,000

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