Answer to Question #299336 in Civil and Environmental Engineering for Glady_7

Question

Company "Rich" pays $2 in dividends annually and estimates that they will pay the dividends indefinitely. How much are investors willing to pay for the dividend with a required rate of return of 5%?

Answer 1

PV = 2/5% = $40

An investor will consider investing in the company if the stock price is $40 or less.