question archive Problem 11-02 Last year Artworks, Inc
Problem 11-02 Last year Artworks, Inc
Subject:FinancePrice:2.86 Bought3
Problem 11-02 Last year Artworks, Inc. paid a dividend of $3.80. You anticipate that the company's growth rate is 3 percent and have a required rate of return of 9 percent for this type of equity Investment. What is the maximum price you would be willing to pay for the stock? Round your answer to the nearest cent.
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Price of stock = dividend next year/(Required return - growth rate)
=>
Price = 3.8 * (1+0.03)/(0.09 - 0.03)
= 65.23
