Chambers Corporation's ROE is 20%.Their dividend payout ratio is 70%.The last dividend,just paid,was $2.00.If dividends are expected to grow by the company's internal growth rate indefinitely,what is the current value of Chambers common stock if its required return is 18%?

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The correct answer is A.The current value of Chambers common stock can be calculated using the Gordon Growth Model:P0 = D1 / (r - g)where:P0 is the current stock priceD1 is the next dividend paymentr is the required returng is the growth rateGiven:ROE = 20%Dividend payout ratio = 70%Last dividend (D0) = $2.00Required return (r) = 18%First, we need to calculate the growth rate (g):g = ROE x (1 - Dividend payout ratio)g = 20% x (1 - 70%)g = 6%Next, we can calculate the next dividend payment (D1):D1 = D0 x (1 + g)D1 = $2.00 x (1 + 6%)D1 = $2.12Finally, we can calculate the current stock price (P0):P0 = D1 / (r - g)P0 = $2.12 / (18% - 6%)P0 = $17.67Therefore, the current value of Chambers common stock is $17.67.

Chambers Corporation's ROE Is 20