question archive You are considering buying a stock that will pay a dividend of $2
You are considering buying a stock that will pay a dividend of $2
Subject:FinancePrice:2.86 Bought11
You are considering buying a stock that will pay a dividend of $2.3 next year. The dividend is expected to grow at 5.6% per year forever. The interest rate is 10.6%. What is the price of this stock today (in $ dollars)? $
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Price of stock=Next expected dividend ÷(Interest rate- Growth rate)
=$2.3÷(0.106-0.056)
=$2.3÷0.05
=$46
Price of stock is $46
