Schiller Corporation will pay a $3.10 per share dividend next year. The company

Question

Schiller Corporation will pay a $3.10 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year, indefinitely. If you require a return of 11 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.)

Schiller Corporation will pay a $3.10 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year, indefinitely. If you require a return of 11 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.)

Explanation / Answer

Value of share would be = D1/(k-g)

Where D1 = Expected dividend in the next year, k is the required return rate, g is growth rate of dividend

= 3.1/(0.11-0.045)= $47.69

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