XCEL Corporation paid a dividend yesterday for $1.50.They expect to pay dividends annually at a constant 6% annual growth rate indefinitely.If the required rate of return on this investment is 12%,what is the current value of this common stock?
A) $1.50
B) $12.50
C) $13.25
D) $25.00
E) $26.50

Question

Quizplus · Accepted Answer

Using the DDM: P = $1.50(1.06)/(.12 - .06)= $1.59/.06 = $26.50

XCEL Corporation Paid a Dividend Yesterday for $1