A share of common stock has just paid a dividend of $5
Question # 00535171
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Updated on: 05/27/2017 05:18 AM Due on: 05/27/2017
A share of common stock has just paid a dividend of $5 (i.e., D0 = $5) that is expected to grow by 4% each year. If investors require a 12 percent of return, then what is the current stock price? Since the question is a typical constant growth model, an easy way of solving the problem is to use the equation of the constant growth model.
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Solution: A share of common stock has just paid a dividend of $5