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Norma-Jean [14]
2 years ago
7

Cape Corp. will pay a dividend of $3.60 next year. The company has stated that it will maintain a constant growth rate of 5 perc

ent a year forever. a. If you want a return of 17 percent, how much will you pay for the stock
Business
1 answer:
victus00 [196]2 years ago
6 0

Answer:

$30

Explanation:

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid

r = cost of equity

g = growth rate

$3.6 / (0.17 - 0.05)

$3.60 / 0.12  = $30

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