Ask Question
30 November, 00:04

Firm b pays a constant $9.50 dividend on its stock and will maintain this dividend for the next 11 years and will then cease paying dividends forever. if the required return on this stock is 11 percent, what is the current share price? (do not round intermediate calculations and round your answer to 2 decimal places,

e. g., 32.16.)

+4
Answers (1)
  1. 30 November, 02:39
    0
    Firm b pays a constant dividend (D0) = $9.50

    Number of years (N) = 11 years

    Rate of return on the stock (R) = 11%

    The share price of the stock (P0) = Present value of dividend for 11 years at 11%

    P0 = D0*PVIFA (k%, n)

    P0 = $9.50*PVIFA (11%,11)

    P0 = $9.50*6.20625

    P0 = $58.96

    Hence, the price of the stock is $58.96
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Firm b pays a constant $9.50 dividend on its stock and will maintain this dividend for the next 11 years and will then cease paying ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers