A stock just paid a dividend of D₀ = $1.50.The required rate of return is r_s = 9.0%,and the constant growth rate is g = 4.0%.What is the current stock price?

Question

Quizplus · Accepted Answer

The current stock price can be calculated using the Gordon Growth Model: P = D0 * (1 + g) / (rs - g). Substituting the given values: P = 1.50 * (1 + 0.04) / (0.09 - 0.04) = 31.20.

A Stock Just Paid a Dividend of D0 = $1

A Stock Just Paid a Dividend of D₀ = $1