Canada Inc.pays an annual dividend of $3.00 per share.If your required rate of return on an equity investment is 13%,and Canada Inc.'s expected growth rate is 3%,what should be Canada Inc.'s price?

Question

Quizplus · Accepted Answer

Using the Gordon Growth Model, we can calculate the price of Canada Inc.'s stock as follows:

Price = Dividend per Share / (Required Rate of Return - Expected Growth Rate)

Price = $3.00 / (0.13 - 0.03) = $30.90

Therefore, the answer is B, $30.90.