Marty Corporation's next dividend and stock price are expected to be $3 and $15 respectively. If the investor's rate of return is 10%, determine the stock price now.

Question

Quizplus · Accepted Answer

The stock price now can be calculated using the dividend discount model: P0 = (D1 + P1) / (1 + r). Here, D1 = $3, P1 = $15, and r = 0.10. So, P0 = ($3 + $15) / 1.10 = $16.36.

Marty Corporation's Next Dividend and Stock Price Are Expected to Be