Lapidus Restaurants Incorporated currently pays a $5.00 common stock dividend. The dividend is expected to remain at $5.00 and not expected to grow in the future. What is the current value of Lapidus Restaurants common stock to an investor requiring an 11% rate of return?

Question

Quizplus · Accepted Answer

The value of a stock with a constant dividend and no growth is calculated using the dividend discount model for a perpetuity: $P = \frac{D}{r}$, where $P$ is the price, $D$ is the dividend, and $r$ is the required rate of return. Plugging in the values: $P = \frac{5.00}{0.11} = 45.45$.

Lapidus Restaurants Incorporated Currently Pays a $5