Gold Coast Health System just paid an annual dividend of $1.50, which is expected to grow at a constant rate of 5 percent per year. If the current required rate of return is 15 percent, what is the value of Gold Coast's stock?

A) $15.75

B) $15.50

C) $15.25

D) $15.00

E) $14.75

Question

Business

Isis

13 November, 11:58

Gold Coast Health System just paid an annual dividend of $1.50, which is expected to grow at a constant rate of 5 percent per year. If the current required rate of return is 15 percent, what is the value of Gold Coast's stock?

A) $15.75

B) $15.50

C) $15.25

D) $15.00

E) $14.75

+2

Answers (1)

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Taniyah Summers · Answer 1

Answer: Po = Do (1+g) / ke-g

Po = $1.50 (1+0.05) / 0.15-0.05

Po = $1.50 (1.05) / 0.10

Po = $1.575/0.10

Po = $ 15.75

The correct answer is A

Explanation: In this question, there is need to calculate the value of the company's stock on the ground that dividend has been paid. The value of the stock is a function of current divided paid, growth rate and the required rate of return on the stock.

Gold Coast Health System just paid an annual dividend of $1.50, which is expected to grow at a constant rate of 5 percent per year. If the current required rate of return is 15 percent, what is the value of Gold Coast's stock?A) $15.75B) $15.50C) $15.25D) $15.00E) $14.75

Gold Coast Health System just paid an annual dividend of $1.50, which is expected to grow at a constant rate of 5 percent per year. If the current required rate of return is 15 percent, what is the value of Gold Coast's stock?

A) $15.75

B) $15.50

C) $15.25

D) $15.00

E) $14.75