Bui Corp. pays a constant $13.20 dividend on its stock. The company will maintai

Question

Bui Corp. pays a constant $13.20 dividend on its stock. The company will maintain this dividend for the next ten years and will then cease paying dividends forever.

If the required return on this stock is 12 percent, what is the current share price?

Bui Corp. pays a constant $13.20 dividend on its stock. The company will maintain this dividend for the next ten years and will then cease paying dividends forever.

If the required return on this stock is 12 percent, what is the current share price?

Explanation / Answer

price = 13.20 * [1- 1.12^-10]/0.12

= 74.58

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