question archive The Let'sDoGreatOnTheSecondExam Company expects a constant growth in earnings and dividends of 4%/year into the foreseeable future

The Let'sDoGreatOnTheSecondExam Company expects a constant growth in earnings and dividends of 4%/year into the foreseeable future

Subject:FinancePrice:2.87 Bought7

The Let'sDoGreatOnTheSecondExam Company expects a constant growth in earnings and dividends of 4%/year into the foreseeable future. It is expected that the next dividend paid to stockholders will be $3.00/share. Currently the market of investors is demanding or requiring 10% on this investment. 
What is the current value of the stock?

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Answer:

Current price=D1/(Required return-Growth rate)

=3/(0.1-0.04)

which is equal to

=$50.