Using the Gordon growth formula, if D₁ is $1.00, kₑ is 10 percent or 0.10, and g is 5 percent or 0.05, then the current stock price is ________.
A)$10
B)$20
C)$30
D)$40

Name: Using the Gordon growth formula, if D₁ is $1.00, kₑ is 10 percent or 0.10, and g is 5 percent or 0.05, then the current stock price is ________. A)$10 B)$20 C)$30 D)$40
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Question

Quizplus · Accepted Answer

The Gordon growth formula is P₀ = D₁ / (kₑ - g). Plugging in the values: P₀ = $1.00 / (0.10 - 0.05) = $1.00 / 0.05 = $20.

Using the Gordon Growth Formula, If D₁ Is $1