Question

Boehm Incorporated is expected to pay a $1.10 per share dividend at the end of this year (i.e., D1 = $1.10). The dividend is expected to grow at a constant rate of 4% a year. The required rate of return on the stock, rs, is 15%. What is the estimated value per share of Boehm's stock? Do not round intermediate calculations. Round your answer to the nearest cent. $

Answer 1

Answer:

$10

Explanation:

The dividend is $1.10

The constant rate is 4%

The required rate of return in the stock is 15%

Therefore the estimated value per share can be calculated as follows

= 1.10(0.15-0.04)

= 1.10/(0.11)

= $10

Hence the estimated valuee is $10