What should be the price of a stock that offers a $4 annual dividend with no prospects of growth, and has a required return of 12.5 percent?
A)$8.50
B)$25.00
C)$32.00
D)$50.00

Question

Quizplus · Accepted Answer

To determine the price of the stock, we can use the formula: P = D / R, where P is the price of the stock, D is the annual dividend, and R is the required return.
Substituting the values given in the problem: P = $4 / 0.125 = $32. Therefore, the price of the stock should be $32. Option C is the correct choice.

What Should Be the Price of a Stock That Offers