What price would you expect to pay for a stock with 13 percent required rate of return, 4 percent rate of dividend growth, and an annual dividend of $2.50 which will be paid tomorrow? A)$27.78 B)$30.28 C)$31.10 D)$31.39 P_o = D_o +

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The correct answer is D because the price of a stock is calculated using the dividend discount model, which takes into account the required rate of return, the rate of dividend growth, and the annual dividend. The formula for the dividend discount model is:P_o = D_o / (r - g)where:P_o is the current price of the stockD_o is the annual dividendr is the required rate of returng is the rate of dividend growthIn this case, the annual dividend is $2.50, the required rate of return is 13%, and the rate of dividend growth is 4%. Plugging these values into the formula, we get:P_o = $2.50 / (0.13 - 0.04) = $31.39

What Price Would You Expect to Pay for a Stock