According to the Gordon growth model,what is the value of a stock with a dividend of $2,required return on equity of 8% and expected growth rate of dividends of 4%?

Question

Quizplus · Accepted Answer

Using the Gordon growth model, the value of the stock can be calculated as follows:
Value of Stock = Dividend / (Required Return on Equity - Expected Growth Rate of Dividends)
Value of Stock = $2 / (0.08 - 0.04)
Value of Stock = $2 / 0.04
Value of Stock = $50
Therefore, the correct choice is D.

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