contestada

Caan corporation will pay a $2.70 per share dividend next year. the company pledges to increase its dividend by 5.5 percent per year indefinitely. if you require a return of 12 percent on your investment, how much will you pay for the company’s stock today?

Respuesta :

Aliwohaish12
Use the constant growth model, we find the price of the stock today is:
P0 = D1 / (R − g) = $2.70 / (0.12 − 0.055) = $41.54