The Stable Hotel Management Company has been consistently paying an annual dividend of $4 for many years. The market expects this annual dividend payment to continue well into the future. Analysts attribute a required rate of return of 10% for shareholders in the company. Based on the perpetuity formula, what is the value of the company's shares?

Question

Quizplus · Accepted Answer

According to the perpetuity formula, the value of the shares can be calculated as Dividend / Required Rate of Return. In this case, the value of the shares is $4 / 0.1 = $40. Therefore, the correct choice is B.

The Stable Hotel Management Company Has Been Consistently Paying an Annual