Gator Tires pays a constant annual dividend of $1.21 per share. How much are you willing to pay for one share if you require a rate of return of 9.3 percent

I will pay $13 for one share

Explanation:

Dividend Valuation method is used to value the stock price of a company based on the dividend paid, its growth rate and rate of return. The price is calculated by calculating present value of future dividend payment.

Formula to calculate the value of stock

Price = Dividend / (Rate or return - growth rate)

Due to constant payment of dividend there is no growth in the dividend

Price = $1.21 / (9.3% - 0%)

Price = $1.21 / 9.3%

Price = $13