1. You are evaluating the purchase of HypeToys, Inc. common stock that just paid an annual dividend of $1.80. You expect the div

Question

3 years ago

9

1. You are evaluating the purchase of HypeToys, Inc. common stock that just paid an annual dividend of $1.80. You expect the div

idend to grow at a rate of 12% per year, indefinitely. You estimate that a required rate of return 17.5% will be adequate compensation for this investment. Assuming that your analysis is correct, and the company pays dividends once a year, what is the most that you’re willing to pay for the common stock if you were to purchase it today? Round to the nearest $.01.

Business