Zephyr Electricals is a company with no growth potential. Its last dividend payment was $4.50, and it expects no change in future dividends. What is the current price of the company's stock given a discount rate of 9 percent?
A) $40.50
B) $50.00
C) $45.00
D) $500.00

Question

Quizplus · Accepted Answer

The stock price can be calculated using the formula for a perpetuity: Price = Dividend / Discount Rate = $4.50 / 0.09 = $50.00.

Zephyr Electricals Is a Company with No Growth Potential