According to the Gordon growth model,what is the value of a stock with a dividend of $1,required return on equity of 10% and expected growth rate of dividends of 5%?

Question

Quizplus · Accepted Answer

The formula for the Gordon growth model is:
Stock value = Dividend / (Required return on equity - Expected growth rate of dividends)
Substituting the given values, we get:
Stock value = $1 / (0.10 - 0.05) = $20
Therefore, the correct answer is (D) $21, which is the closest value to $20.

According to the Gordon Growth Model,what Is the Value of a Stock