What is the current price of a telecommunication company's stock if the current dividend is $0.80, the expected constant growth rate in dividends is 5% and the required return is 10%?
A) $16.00
B) $16.80
C) $8.00
D) $8.40

Question

Quizplus · Accepted Answer

The current price of the stock can be calculated using the constant growth rate model:

Price = Dividend / (Required Return - Growth Rate)

Plugging in the given values,

Price = 0.80 / (0.10 - 0.05) = $16.80

Therefore, the current price of the stock is $16.80, which is option B.

What Is the Current Price of a Telecommunication Company's Stock