Consider the following information:
Expected dividend next period = $2.00
Required return by common share investors = 9.00%
Forecast long-run growth rate = 3.00%
The price per share of stock for this company is closest to:

Question

Quizplus · Accepted Answer

The price per share can be calculated using the Gordon Growth Model (Dividend Discount Model for a perpetuity with growth) as P = D / (r - g), where P is the price, D is the expected dividend, r is the required return, and g is the growth rate. Plugging in the values: P = $2.00 / (0.09 - 0.03) = $2.00 / 0.06 = $33.33.

Consider the Following Information