A stock just paid a dividend of D0 = $1.50. The required rate of return is rs = 10.1%, and the constant growth rate is g = 4.0%. What is the current stock price?
A) $23.11
B) $23.70
C) $24.31
D) $24.93
E) $25.57

Question

Quizplus · Accepted Answer

$\begin{array}{lr}
\mathrm{D}_{0} & \$ 1.50 \
\mathrm{r}_{\mathrm{s}} & 10.1 \% \
\mathrm{~g} & 4.0 \% \
\mathrm{D}_{1}=\mathrm{D}_{0}(1+\mathrm{g})= & \$ 1.56 \
\mathrm{P}_{0}=\mathrm{D}_{1} /\left(\mathrm{r}_{\mathrm{S}}-\mathrm{g}\right) & \$ 25.57
\end{array}$

A Stock Just Paid a Dividend of D0 = $1