The Isberg Company just paid a dividend of $0.80 per share,and that dividend is expected to grow at a constant rate of 6.00% per year in the future.The company's beta is 1.25,the market risk premium is 5.00%,and the risk-free rate is 4.00%.What is the company's current stock price?

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The correct answer is A.The current stock price can be calculated using the Gordon Growth Model:P0 = D1 / (r - g)where:P0 is the current stock priceD1 is the next dividend payment ($0.80 * 1.06 = $0.848)r is the required rate of returng is the growth rate of dividends (6.00%)Using the Capital Asset Pricing Model (CAPM), we can calculate the required rate of return:r = rf + β * (rm - rf)where:rf is the risk-free rate (4.00%)β is the beta (1.25)rm is the market risk premium (5.00%)r = 4.00% + 1.25 * (5.00% - 4.00%) = 5.25%Substituting these values into the Gordon Growth Model, we get:P0 = $0.848 / (5.25% - 6.00%) = $19.95

The Isberg Company Just Paid a Dividend of $0