Dave Amos Ltd pays a constant dividend of $2 every year.What will the stock sell for three years from now if the required rate of return is 9 percent?

Question

Quizplus · Accepted Answer

The stock price of a perpetuity is calculated using the formula: Price = Dividend / Required Rate of Return. Here, Price = $2 / 0.09 = $22.22. Since the dividend is constant, the price remains the same in three years.

Dave Amos Ltd Pays a Constant Dividend of $2 Every