Wesen Corp. will pay a dividend of $3.40 next year. The company has stated that

Question

Wesen Corp. will pay a dividend of $3.40 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 9 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

Current price=Dividend for next period/(Requird return-Growth rate)

1.Current price=3.4/(0.15-0.045)=$32.38(Approx).

2.Current price=3.4/(0.09-0.045)=$75.56(Approx)

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.