Zero growth: BlackSteel Manufacturing Company has been generating stable revenues but sees no growth in it for the foreseeable future. The company's last dividend was $3.25, and it is unlikely to change the amount paid out. If the required rate of return is 12 percent, what is the share worth today?

Question

Quizplus · Accepted Answer

The formula to calculate the value of a share with zero growth is:
Value of share = Dividend / Required rate of return
Substituting the values, we get:
Value of share = $3.25 / 0.12 = $27.08
Hence, the answer is C.

Zero Growth: BlackSteel Manufacturing Company Has Been Generating Stable Revenues