Shara Miselle Co.just paid a dividend of $1.65 (D₀)on its common stock.This company's dividends are expected to grow at a constant rate of 3% indefinitely.If the required rate of return on this stock is 11%,compute the current value per share of Shara Miselle stock.

Question

Quizplus · Accepted Answer

We can use the Gordon Growth Model to calculate the current stock price:

Current Stock Price = Dividend / (Required Rate of Return - Dividend Growth Rate)

= $1.65 / (0.11 - 0.03)

= $21.24

Therefore, the current value per share of Shara Miselle stock is $21.24. The correct choice is B.