Stag Corp. will pay dividends of $4.75, $5.25, $5.75, and $7 for the next four years. Thereafter, the company expects its growth rate to be at a constant rate of 7 percent. If the required rate of return is 15 percent, what is the current market price of the stock? (Do not round intermediate calculations. Round final answer to two decimal places.)

Question

Quizplus · Accepted Answer

The correct answer is A because the current market price of the stock is $69.41. This is calculated by using the dividend discount model, which takes into account the present value of the future dividends and the terminal value of the stock. The required rate of return is 15%, and the growth rate is 7%.

Stag Corp Will Pay Dividends of $4