Kay Williams is interested in purchasing the common stock of Reckers, Inc., whic
ID: 2622851 • Letter: K
Question
Kay Williams is interested in purchasing the common stock of Reckers, Inc., which is currently priced at $34.16. The company is expected to pay a dividend of $2.58 next year and to increase its dividend at a constant rate of 6.0 percent.
Kay Williams is interested in purchasing the common stock of Reckers, Inc., which is currently priced at $34.16. The company is expected to pay a dividend of $2.58 next year and to increase its dividend at a constant rate of 6.0 percent.
What should the market value of the stock be if the required rate of return is 14 percent? (Round answer to 2 decimal places, e.g. 15.25.)
Kay Williams is interested in purchasing the common stock of Reckers, Inc., which is currently priced at $34.16. The company is expected to pay a dividend of $2.58 next year and to increase its dividend at a constant rate of 6.0 percent.
Explanation / Answer
As per gordon growth model
Ke = (D1/P0) + g
Ke = 14 %
D1=2.58
P0= MV of stock
g= growth rate=6%
Market vale of stock =2.58/(0.14-0.06)=32.25Related Questions
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