National Trucking has paid an annual dividend of $1 per share on its common stock for the past 15 years and is expected to continue paying a dollar a share long into the future. Given this, one share of the firm's stock is:

Question

Quizplus · Accepted Answer

A perpetuity is a stream of equal payments that goes on indefinitely. Since National Trucking has paid a $1 dividend per share for the past 15 years and is expected to continue doing so, it can be valued as a perpetuity with a $1 payment. Therefore, one share of the firm's stock is priced the same as a $1 perpetuity.

National Trucking Has Paid an Annual Dividend of $1 Per