contestada

Hudson Corporation will pay a dividend of $2.78 per share next year. The company pledges to increase its dividend by 4.5 percent per year indefinitely. If you require a return of 15 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Respuesta :

Answer:

You need to pay $26.47. The further explanation is given below.

Explanation:

The given values are:

Dividend

[tex]D_1 = $2.78\ per share[/tex]

Required rate of return

[tex]k_e = 0.15[/tex]

Dividend's growth rate

[tex]g = 0.045[/tex]

Now,

The stock price will be:

= [tex]\frac{2.78}{0.15-0.045}[/tex]

= [tex]\frac{2.78}{0.105}[/tex]

= [tex]26.47[/tex]

Otras preguntas

Q&A Education