Williamson Metals, Inc. paid a dividend last year of $3, and is expecting dividends to grow at an 18% rate in years 1 and 2 followed by constant growth of 6% per year thereafter. Similar stocks return 12%. Calculate the value of the stock today.

Question

Quizplus · Accepted Answer

The correct answer is A because the value of the stock today is $65.37. This is calculated using the Gordon Growth Model, which takes into account the current dividend, the expected growth rate of dividends, and the required rate of return. In this case, the current dividend is $3, the expected growth rate of dividends is 18% for the first two years and 6% thereafter, and the required rate of return is 12%.