You have decided that you would like to own some shares of GH Corp.but need an expected 12.5% rate of return to compensate for the perceived risk of such ownership.What is the maximum you are willing to spend per share to buy GH stock if the company pays a constant $3.40 annual dividend per share?

Question

Quizplus · Accepted Answer

The maximum price you are willing to pay for a stock with a constant dividend can be calculated using the formula: Price = Dividend / Required Rate of Return. Here, Price = $3.40 / 0.125 = $27.20.

You Have Decided That You Would Like to Own Some