Staal Corporation will pay a $3.18 per share dividend next year. The company ple

Question

Staal Corporation will pay a $3.18 per share dividend next year. The company pledges to increase its dividend by 5.5 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

Staal Corporation will pay a $3.18 per share dividend next year. The company pledges to increase its dividend by 5.5 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Staal Corporation will pay a $3.18 per share dividend next year. The company pledges to increase its dividend by 5.5 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock today? (Round your answer to 2 decimal places. (e.g., 32.16))

Stock price = Expected Dividend/(Required rate of return - growth rate)

Stock price = 3.18/(10%-5.5%)

Stock price = $ 70.67

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