A share of common stock just paid a dividend of $1.00.If the expected long-run growth rate for this stock is 5.4%,and if investors' required rate of return is 14.2%,what is the stock price?

Question

Quizplus · Accepted Answer

We can use the constant growth model to find the stock price:
P = D / (r - g)
where P is the stock price, D is the dividend, r is the required rate of return, and g is the expected growth rate.
Plugging in the given values,
P = 1 / (0.142 - 0.054) = $11.98
Therefore, the stock price is $11.98, which is closest to option B.

A Share of Common Stock Just Paid a Dividend of $1.00.If