JJ Companies will pay an annual dividend of $2.10 a share on its common stock next year.Last week,the company paid a dividend of $2 a share.The company adheres to a constant rate of growth dividend policy.What will one share of this stock be worth ten years from now if the applicable discount rate is 9 percent?

Question

Quizplus · Accepted Answer

g = ($2.10 - 2.00)/$2.00 = .05P₁₀ = ($2.10 × 1.05¹⁰)/(.09 - .05)P₁₀ = $85.52

JJ Companies Will Pay an Annual Dividend of $2