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AVprozaik [17]
3 years ago
11

What would be the maximum an investor should pay for the common stock of a firm that has no growth opportunities but pays a divi

dend of $1.36 per year? The required rate of return is 12.5 percent.
a. $11.24
b. $9.52
c. $10.88
d. $10.64
e. $11.47
Business
1 answer:
e-lub [12.9K]3 years ago
6 0

Answer:

$10.88

Explanation:

Calculation to determine What would be the maximum an investor should pay for the common stock of a firm that has no growth opportunities

Using this formula

Maximum payment for common stock=Dividend/Required rate of return

Let plug in the formula

Maximum payment for common stock=$1.36/.125 Maximum payment for common stock= $10.88

Therefore What would be the maximum an investor should pay for the common stock of a firm that has no growth opportunities is $10.88

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