Wesen Corp. will pay a dividend of $3.80 next year. The company has stated that

Question

Wesen Corp. will pay a dividend of $3.80 next year. The company has stated that it will maintain a constant growth rate of 4.5 percent a year forever.

If you want a return of 15 percent, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Current stock price            $

If you want a return of 12 percent, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Current stock price   

Explanation / Answer

how much will you pay for the stock

=D1/(r-g)

=3.80/(15%-4.5%)=36.19 is the answer

b. how much will you pay for the stock

=D1/(r-g)

=3.80/(12%-4.5%)=50.67

the above are the answer

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