Assume that at the end of the next year,Company A will pay a $2.00 dividend per share,an increase from the current dividend of $1.50 per share.After that,the dividend is expected to increase at a constant rate of 5%.If you require a 12% return on the stock,the value of the stock is ________.

Question

Quizplus · Accepted Answer

The correct answer is A because the value of the stock is $28.57. This is calculated using the dividend discount model, which takes into account the current dividend, the expected growth rate of the dividend, and the required return on the stock.

Assume That at the End of the Next Year,Company a Will