asino Inc. expects to pay a dividend of $3 per share at the end of year 1 (Div1) and these dividends are expected to grow at a c

Question

3 years ago

13

onstant rate of 6 percent per year forever. If the required rate of return on the stock is 18 percent, what is the current value of the stock today?

1 answer:

pentagon [3] · Answer 1 · 2022-08-03T08:43:59+03:00

Answer:

the current stock of the value today is $25

Explanation:

The computation of the current stock of the value today is shown below:

Next year dividend D1 = $3

growth rate g =6% forever

rate of return = 18%

So,

Current Stock Price P = D1 ÷ (r - g)

=3 ÷ (18% - 6%)

= 3 ÷ 12%

= 3 ÷ 0.12

= $25

Hence, the current stock of the value today is $25