question archive ABC corporation has announced that it will pay a 3$ dividend 1 year from now
ABC corporation has announced that it will pay a 3$ dividend 1 year from now
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ABC corporation has announced that it will pay a 3$ dividend 1 year from now. Investors expect that the growth rate of the dividends will be constant 5% from then on. If the required rate of return on the stock is 15%, what is the price of the stock today? Select one: a.20 b.31.5 c.30 d.35
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ANSWER
C. 30
STOCK PRICE = DIVIDEND AFTER 1 YEAR / REQUIRED RATE - GROWTH RATE
= 3 / 15% - 5%
= 30
