Jefferson's recently paid an annual dividend of $1.31 per share.The dividend is expected to decrease by 4% each year.How much should you pay for this stock today if your required return is 16%?

Name: Jefferson's recently paid an annual dividend of $1.31 per share.The dividend is expected to decrease by 4% each year.How much should you pay for this stock today if your required return is 16%?
Brand: Quizplus
Rating: 4.8 (42 reviews)

Question

Quizplus · Accepted Answer

Price = [$1.31 × (1 − 0.04)]/[0.16 − (−0.04)] = $6.29

Jefferson's Recently Paid an Annual Dividend of $1