Kandle Company paid a dividend of $4.76 per share this year and plans to pay a dividend of $5 per share next year, which is expected to increase by 3 percent per year subsequently. The requiredrate of return is 15 percent. The value of Kandle stock, according to the dividend discount model, is $____.
A) 39.67
B) 41.67
C) 33.33
D) 31.73
E) none of the above

Question

Quizplus · Accepted Answer

The value of the stock is calculated using the Gordon Growth Model: P = D1 / (r - g) = 5 / (0.15 - 0.03) = 41.67.

Kandle Company Paid a Dividend of $4