The common stock of Textile Mills pays an annual dividend of $1.65 a share.The company has promised to maintain a constant dividend even though economic times are tough.How much are you willing to pay for one share of this stock if you want to earn a 12 percent annual return?
A)$13.75
B)$14.01
C)$14.56
D)$14.79
E)$15.23

Question

Quizplus · Accepted Answer

The price of a stock with a constant dividend can be calculated using the formula: Price = Dividend / Required Rate of Return. Here, Price = $1.65 / 0.12 = $13.75.

The Common Stock of Textile Mills Pays an Annual Dividend