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sladkih [1.3K]
3 years ago
8

A company pays a constant 6.5 dividend on stock. The dividend will maintain for the next 12 years and cease forever. The require

d return on the stock is 9.1 percent. What is the current share price?
Business
1 answer:
zalisa [80]3 years ago
6 0

Answer:

$46.31

Explanation:

Calculation to determine the current share price

Using this formula

Current share price=6.5*Present value of annuity factor(9.1%,12)

Present value of annuity=Annuity*[1-(1+interest rate)^-time period]/rate

Let plug in the formula

Current share price=6.5*[1-(1+0.091)^-12]/0.091

Current share price=6.5*[1-(1.091)^-12]/0.091

Current share price=6.5*7.124793

Current share price=$46.31

Therefore the current share price will be $46.31

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