Question

An issue of common stock’s most recent dividend is $1; its growth rate is 5%. What is its price if the required rate of return is 10%?

Answer 1

$Bond \,price = {D\over r-g}$

Where D is dividend

r is discount rate

g is growth rate

$$={1\over {{10\over 100}-{5\over 100}}}$$

$$Bond \, price =20$$