Answer to Question #278175 in Financial Math for iii

Question #278175

A php 300 per share dividend was paid by a certain stock. The dividend is estimated to grow at 4.75% per year until further notice. What is the price of the stock today if the required return is 8.75%


1
Expert's answer
2021-12-13T08:35:46-0500

The price of a stock is calculated as

P=D1rgP=\dfrac{D_1}{r-g}

Therefore, if a stock paid 300 in dividends and the dividends are expected to grow at the rate of 4.75% per year, the price of the stock if the rate of return is 8.75% is equal to

P=3000.08750.0475P=7500P=\dfrac{300}{0.0875-0.0475}\\[0.3cm] P=\boxed{7500}


Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment